Market pricing has shifted to a September-December start to the easing cycle. The New Zealand dollar should consolidate further.
It is difficult to see the New Zealand dollar stage any kind of sustainable rally. Data is likely to portray softer growth than the Reserve Bank's projections.
Yield demand for the New Zealand dollar appears to remain unquenched.
U.S. dollar weakness will see the New Zealand dollar test higher levels. With the prospect of less support from interest rates, the U.S. dollar fell across the board.
The sticking point for the Reserve Bank is still inflation. It is likely to be September before the bank is comfortable that pressures have dissipated enough.
Any sign of softening will see markets bring forward expectations of rate cuts. Tough talk on interest rates may provide further opportunities to sell New Zealand dollars.
A launching pad was established for the New Zealand dollar to rally. Offshore and local buyers were looking for something with a five in front.
The yield differential story is going to continue to be there. The Fed is getting closer to the end of their tightening cycle.
The labor market data is expected to record some deterioration. This will keep the New Zealand dollar on the defensive.
