The NZDUSD popped over 50 pips after the RBNZ released its latest economic statement at the RBNZ Rate meet today. NZ10Y rates which have held up better than the US rates will not doubt continue to increase at the chance that the RBNZ will move sooner than later when compared with the Dovish Fed.
@CCNXXZ, Thanks for your question - A few things:
The Kiwi is benefiting from beating covid and then recovering faster than other economies, so this is why the RBNZ is looking to move rates faster than other Western Countries except Canada which has announced easing. So this generally means that it should be gain in strength.
Offsetting this though is a few considerations:
The future direction of the USD - this has been debated for since Fed when the market decided that the Fed would act earlier than it had previously advised. The market has since accepted the Fed's Dovish tone and the the USD has weakened to key support levels If the USD breaks down below 90.00 and then 89.00 then the kiwi will be set for a long ride up.
If on the other hand the Fed changed direction than we may see the USD change course, however this scenario is less likely than the first option.
Other risks that might face the kiwi are challenges to its economic growth which may come from disruptions to its trade with China, such that Australia has experienced. This would reduce export income and lower GDP and impact the strength of the USD.
So quietly confident that the NZDUSD will continue upwards but watch for risks of USD direction change and China tensions.