NZD flat ahead of RBNZ decision tomorrow

NZD flat ahead of RBNZ decision tomorrow

By Andrew May (Sales Trader, CMC Markets New Zealand)

The NZD/USD cross has stayed remarkably supported through late 2012 levels of 82c for the majority of this year, retracing the 0.8534 highs experienced mid February as continual risk pulled the Kiwi to the upside. However, as the long awaited return of dollar bulls continue to shun growth currencies the NZD finds itself under pressure.

We open today at 0.8255 albeit higher in the wake of an appreciating Aussie dollar. There remains some slight upwind pressure that could see the Kiwi push to the under side of 83c. As we're experiencing the worst drought in almost 60 years across the majority of the North Island I wouldn't expect the NZD to appreciate further come the Reserve Bank rate decision tomorrow morning in which the general consensus is for rates to be left unchanged at 2.5%.

First quarter forecast GDP growth could be revised lower by up to 1% as a consequence and the longer the heat wave endures the greater the impact will be. This will affect national trade balance revenue as a severe decline in milk production will trim the surplus expectation for 2014/15. The NZD will slowly free fall over the coming months under 80c, barring small rally's for offshore risk.

Investors will cautiously await RBNZ comments tomorrow of the first monetary policy statement for 2013 to no doubt weigh up and gauge the longevity of holding long Kiwi positions.

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