ANZ's New Zealand Dollar Forecasts For 2024 See Strength Against Dollar, Ongoing Weakness vs. Pound

Economic

Forex

Summary:

ANZ Bank predicts a 2024 recovery for the New Zealand Dollar (NZD) against the U.S. Dollar, driven by global risk appetite and the NZD's carry advantage. However, uncertainty about the Reserve Bank of New Zealand's interest rates may bring volatility. ANZ expects the NZD's strength to persist, but the Pound's rise against the U.S. Dollar poses a challenge. Forecast for NZD/USD: 0.62 by March, 0.62 by June, 0.63 by September, and 0.63 by year-end. Pound to NZD forecast: 2.10, 2.13, 2.10, and 2.13.

The New Zealand Dollar is set to embark on a recovery against the U.S. Dollar in 2024 according to research from one of New Zealand's biggest financial institutions.

ANZ Bank says NZD has room to rise in 2024, "but not without volatility", particularly given some uncertainty surrounding the Reserve Bank of New Zealand's next moves on interest rates.

Nevertheless, the bigger picture is one that is supportive of the risk-sensitive Kiwi Dollar.

"A global return of risk appetite and the NZD’s high carry advantage will drive the upside we expect into 2024," says ANZ in a year-ahead outlook note.

"A positive cyclical outlook bodes well for high beta currencies like NZD," it adds.

The New Zealand Dollar has been one of the better-performing major currencies heading into year-end, courtesy of the improved investor sentiment linked to growing expectations that the Federal Reserve will be able to cut interest rates in the coming months.

According to ANZ, this recent outperformance can extend against the U.S. Dollar over the coming months.

However, the Pound is tipped to defy NZ dollar strength as it will also advance against the U.S. currency and frustrate expectations for a dip back below 2.0 in GBP/NZD.

"Though the growth outlook remains challenging, recent data suggest the economy may be turning a corner," says ANZ on the UK economic outlook. As a result, analysts say the Pound, "is not to be underestimated".

Question marks over the path adopted by the NZD hang over whether or not the RBNZ will raise interest rates again.

Market pricing shows investors are not fully positioned for another move, but data due for release ahead of the February decision could yet sway the central bank into action.

Currency analysts warn that a rate rise will likely lead to a selloff in the NZD/USD, as we have seen after previous hikes. "The prospect that further tightening could heighten the risk of a recession will weigh on the currency."

All considered, ANZ's New Zealand to U.S. Dollar forecast for the end of March 2024 is 0.62, 0.62 by end-June, 0.63 by end-September and 0.63 by year-end. The exchange rate is currently at 0.6258.

ANZ's Pound-Dollar forecast profile reflects an expectation that the UK economy has turned a corner, with 1.30, 1.32, 1.33 and 1.34 pencilled in for the aforementioned time points.

This translates into a Pound to New Zealand Dollar forecast profile of 2.10, 2.13, 2.10 and 2.13.

Source: PoundSterlingLive

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Swissquote

Economic

Forex

Isn't it amazing how investors ignore the hawkish Federal Reserve (Fed) comments but fully embrace the dovish commentaries.

Fed's Thomas Barkin's words that suggested that the Fed could cut rates if recent progress inflation continues sent the Nasdaq 100 to a fresh record for the 3rd consecutive day and the S&P500 to a fresh ytd high and near an ATH record as well. Yet all the other central bankers' warnings that it could be too early to cut rates didn't see the same enthusiastic reaction. But the trend is your friend, the doves are your friends, the hawks are not your friends and that's – I guess – the magic ingredient to ensure a Santa rally.

Yet, there is no rational explanation to this asymmetric market reaction given that the latest USeconomic data points at ongoing strength, and the latter should be, in theory, supportive of the Fed hawks.

Investors are dreaming of aggressive rate cuts in an environment of strong economic growth, and that is not the right recipe for easing inflation and keeping it sufficiently low. The robust economic data and high earnings expectations are not compatible with a dovish Fed.

FedEx rings the alarm bell

The latest FedEx results didn't enchant investors yesterday. The company, which serves as a gauge of economic activity, missed expectations due to declining airfreight and trucking volumes. The stock price fell 7% after the closing bell. The selloff will likely send FedEx below its uptrending channel building since October – on the back of falling yields, but that negative correlation between the FedEx and the US 10-year yield is about to break, as FedEx, like most stocks, can't continue to rise on the back of the falling yields: a further fall in yields implies a decent economic slowdown and that isn't good for earnings, earnings expectations and hence the valuations.

Zooming out, the S&P stocks are now trading at nearly 20 times the 12-month earnings estimates, and the trailing 12-month EPS estimate is at a record. This is a valuable insight into the expectations regarding the overall earnings performance of the companies in the S&P500, and the numbers don't look like an economy that needs looser financial conditions.

Dollar weakness

Released yesterday, the latest housing data in the US showed that housing starts jumped nearly 15% in November as the mortgage rates dipped from above 8% to below 7% thanks to a swift fall in US yields. That's a good sign for economic health, but not necessarily for the future path of inflation. But the dollar didn't react.

Another interesting place to see is the US deposits. The US deposits were around 80% at the peak of the pandemic and are now reverting toward pre-pandemic norm of around 60%. The melting excess savings could slow down the US consumer spending, hence temper the economic growth and tame inflation, but Atlanta Fed's GDPNow points at a 2.7% growth in the US GDP in Q4. Thursday's official data will remind that the US economy grew more than 5% in Q3, a number that should raise questions regarding the dovish Fed optimism.

The Fed doves' optimism is overdone given the strength of the underlying economic data, and the upside pressure on energy and shipping costs as the world's leading energy and shipping companies have started avoiding Suez Canal due to Houthi attacks. The recent developments will start showing in the economic data in a few weeks and help investors assess the extent of global implications.

Inflation falls

As worries regarding the implications of developments in the Red Sea mount, latest inflation numbers from Europe and Britain give some respite.

Inflation in the Eurozone slowed to 2.4% in November and core inflation fell to 3.6% as expected.

In the UK, both headline and core inflation fell faster than expected in November. Headline CPI slipped below the 4% mark, as core inflation eased to 5.1%. Cable slipped below 1.27 as a kneejerk reaction to the softer-than-expected inflation figures.

Yet in absolute terms, core inflation in Britain is still more than twice the BoE's 2% inflation target. And even though the pace of easing is more than welcome, the Bank of England (BoE) is still last in line to join the pivot party. Therefore, hawkish BoE expectations should limit the pond selloff if, of course, investors continue to divest from the US dollar on the back of softening Fed expectations.

To stay updated on all economic events of today, please check out our Economic calendar

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Chandan Gupta

Stocks

The Nasdaq 100 index posted a bullish candlestick for the seventh day in a row, surging to a two-year high and a new mid-term high.

U.S. stocks are currently in a strong bull market, and the Nasdaq 100 Index has historically been a great investment in bull markets.

This index touched its previous record high yesterday, though it shied away from hitting a new milestone. As with the Dow, there is presently no sign of a pullback in the works, so the focus is on whether buyers can succeed in eking out a new record high before the end of the year.

In the short-term, some weakness may target the 16,000 area, where the price consolidated in November before its most recent leg higher.

Last week, weaker-than-expected US inflation data and a dovish stance from the Federal Reserve gave US stocks a big tailwind, with markets now expecting a rate cut in March 2024. I am happy to take a long position in the Nasdaq 100 Index. Especially since we saw a simple moving average crossover where the 50 day mark crossed his 100 day mark.

Stock markets, particularly in the United States, are generally optimistic, with the Nasdaq 100 hitting a record high yesterday and the benchmark S&P 500 hitting a 23-month high, close to its all-time high.

The bullish environment is due in part to a weaker dollar, and in part to more dovish expectations that the Fed will cut interest rates in 2024.

CME's FedWatch tool estimates a 67.50% probability that the first 25 basis point rate cut will occur in March 2024.

Despite pushback from Bostic and another FOMC member, who said yesterday that the Fed was in no hurry to cut rates.

NASDAQ 100: Really Bullish Or Is It Weaker Dollar_1

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Thomas

Palestinian-Israeli conflict

Latest news on the Israeli-Palestinian conflict

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IONS is a voluntary initiative aimed at strengthening maritime cooperation among the navies of littoral countries in the Indian Ocean region. It consists of 25 member countries and eight observers.

Therefore, keep an eye on IONS developments in the coming days as these countries may propose their own military operations, separate from Operation Prosperity Keepers.

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Yemeni media threatens again: Any threat against Yemen will turn the Red Sea into a graveyard for your fragile warships!

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Ukrainian President Zelensky announced that the Ukrainian army is seeking to mobilize an additional 450,000-500,000 soldiers.

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The Houthi armed forces in Yemen have unveiled their deadly weapon against the U.S. Navy and its coalition aircraft carrier battle group: Iran's "Tankil" anti-ship ballistic missiles!

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