The bullish case for the NZD

Inflation is rising (like almost everywhere). New Zealand Q3 inflation has risen at its fastest pace in 10 years with the annual inflation rate moving up to 4.9% from 3.3% in the second quarter.

Jobs are good (but note Governor Orr’s comments)

The unemployment rate is down to near record lows at 3.4%. Employment up 2% and the participation rate higher too. The only caveat to this is that Governor Orr said that the jobs data was extremely volatile at present.

ANZ & Westpac see the bullish case

ANZ is forecasting the RBNZ to raise interest rates to a 2.0% neutral rate by the end of 2022. Westpac revises their RBNZ forecast higher seeing its peak at 3.0% in 2023 vs their previous forecast of it peaking at 2.0%. The chances of a 50bps rate hike on November 24 must be increasing now.

The divergence between the RBNZ and the BoJ

The huge fall in the JPY has been due to all the world’s central banks being expected to raise interest rates to counter surging inflation. The one central bank that is not expected to respond is the BoJ. This means that the divergence remains in place between the BoJ and the RBNZ. This favours medium-term NZDJPY buying.

Don’t forget the strong seasonal pattern in place for the NZDJPY below.