By FXEmpire.com
NZD/USD Monthly Fundamental Forecast April 2012
Outlook and Recommendation
The incredible run by the New Zealand dollar (NZD) so far in 2012 is bound to lose momentum in the coming months as the Reserve Bank of New Zealand (RBNZ) further supports the country’s economic recovery.
The NZD/USD remains bullish; it is currently trading at 0.8195
In March the kiwi’s trading range is shown below:
The New Zealand economy is showing signs of modest gradual recovery following three years of sluggish growth. Positive trade and investment fundamentals in the Asia/Oceania region are also supporting our appreciating view for the NZDUSD, which seems to be in consolidation mode after reaching a high of 0.8471 on February 29th. The government estimates that real GDP will expand by only 2-2.5% in 2012 (in line with market consensus) and accelerate even further in 2013. Household spending remains low as consumers remain cautious about growth and employment prospects. The negative impact from natural disasters last year has not yet translated into sizable reconstruction-led public spending. The inflation outlook is improving following the 1.8% y/y rate recorded at the end of 2011. The rate of consumer price inflation will likely end the year at 2%. There is no compelling reason to deviate from the current accommodating monetary stance at present; the central bank rate has been on hold at 2.5% since March 2011. An area of growing risk for the NZD may be the emergence of twin deficits as both the budget balance and the current account deficit remain in the red. Of utmost relevance to the NZD outlook is China’s growth dynamics. Although a major deceleration in Chinese activity has become a key global issue to monitor, we remain very positive about economic prospects for the world’s second largest economy, which should have positive implications for New Zealand.
The kiwi is expected to trade around the 0.8200-0.8300 price
Central Bank
The Reserve Bank of New Zealand – RBNZ INTEREST RATE DECISION
Cons.:Previous: 2.5%
RBNZ Interest Rate Decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the NZD.
FED INTEREST RATE DECISION
Previous: 0.25%
The Board of Governors of the Federal Reserve announces an interest rate. This interest rate affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. It also tends to affect the exchange rate. Generally speaking, if the Fed is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the USD.
Originally posted here
