Earlier today markets received news that New Zealand economic growth slowed to a crawl in the first quarter of 2015. The economy grew by 0.2%, well below the median analyst expectation for an increase of 0.6%, with the figure the slowest quarterly expansion seen in two years.
According to the economics team at Westpac the result was “a shocker, with the details not inspiring confidence, including unexpected weakness in business investment”.
As a result of this “shocker” they expect the Reserve Bank of New Zealand will be busy in the months ahead.
“Westpac has changed its view on the RBNZ to include a July rate cut as well as the Sep move already in our forecasts, plus an easing bias into Q4“.
If this comes to pass it will see the overnight cash rate reduced to 2.75%, diminishing the New Zealand dollar’s appeal to yield-hungry carry-trade investors.
Westpac’s senior currency strategist Sean Callow believes the Kiwis medium-term outlook is bleak, describing the currency as the “Frankenstein of FX” in a report released this afternoon. He suggests selling NZD/USD for “those seeking to punish the Kiwi”, predicting the cross is on track to fall to 66c by September, “with downside risks”.
Here’s the daily NZD/USD chart over the past year. According to Callow the Kiwi has been the worst performing G10 currency over the past month.
Currently the Kiwi buys 68.93c.