Capacity constraints are expected to ease, allowing the market to further entertain thoughts of a rate cut.
The market will be dominated by developments with Hurricane Rita. The dollar will remain relatively weak.
Rates are pretty much on hold for the foreseeable future.
The greatest challenges for the New Zealand dollar stem from a lack of upside in interest rates, a concession to slowing domestic growth.
As the final results are not confirmed, there is scope for the New Zealand dollar to be a little shaky on account of the perceived uncertainty. This is exactly what has happened.
We can expect the market to look to test the US65.00/65.30c region at the very least.
The continued failure to breach topside resistance at $1.22 will see some investors turn bearish on the single currency.
The outlook for rates is to the downside on the basis of the slowing growth environment. Any view that the relatively high nominal interest rate structure will be enough to insulate the New Zealand dollar is dead wrong.
It looks unlikely the Kiwi dollar will be able to attract significant inflows to offset the maturities.
