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28 May 2015
RBNZ expected to now cut - ANZ
FXStreet (Guatemala) - Analysts at ANZ noted the downside in NZD/USD post Fonterra announcing an opening milk price of $5.25/kg MS for the 2015/16 season. At the same time, it also lowered its forecast for the 2014/15 season by 10 cents to $4.40/kg MS.
Key Quotes:
"The dairy sector is at the vanguard of the shifting risk profile we see facing the New Zealand economy. The broad story still looks good, and we suspect there is enough momentum and positivity across other elements to withstand additional headwinds."
"However, downside risks are now becoming more pronounced, particularly when you add other recent commodity price falls (forestry, wool and lamb) to the mix and what appears to be less impetus from the Christchurch region."
"To us, these additional risks reinforce what the economy ultimately needs: a lower currency. And just talking about the NZD being extended and overvalued and the allure of possible rate cuts won’t do it in an environment where offshore policy remains ultra-stimulatory."
"The NZD is not going to fall meaningfully without the OCR moving lower, and we continue to expect the RBNZ to cut interest rates by 25bps in June and July."
Key Quotes:
"The dairy sector is at the vanguard of the shifting risk profile we see facing the New Zealand economy. The broad story still looks good, and we suspect there is enough momentum and positivity across other elements to withstand additional headwinds."
"However, downside risks are now becoming more pronounced, particularly when you add other recent commodity price falls (forestry, wool and lamb) to the mix and what appears to be less impetus from the Christchurch region."
"To us, these additional risks reinforce what the economy ultimately needs: a lower currency. And just talking about the NZD being extended and overvalued and the allure of possible rate cuts won’t do it in an environment where offshore policy remains ultra-stimulatory."
"The NZD is not going to fall meaningfully without the OCR moving lower, and we continue to expect the RBNZ to cut interest rates by 25bps in June and July."