NZD/USD TO BOTTOM IN THE 0.57-0.58 AREA – SOCGEN

The Kiwi has been trading sideways year-to-date, following a slow bearish channel since the start of February. Economists at Société Générale analyze NZD outlook.

AUD/NZD closely tracks the rates differential, likely to turn positive in the coming months

We expect further NZD/USD weakness, with the 60 cent-low of June likely to be broken. The move should not send the pair as low as the 0.55 support hit in March 2020 (COVID crisis outbreak) and in October 2022 (US inflation peak and short rates peak this year). We target NZD/USD to bottom in the 0.57-0.58 area.

AUD/NZD closely tracks the 5y rates differential, still slightly negative but now likely to turn positive in the coming months in favour of the AUD, reflecting relatively stronger Australian fundamentals. AUD/NZD is thus likely to surge above 1.10, initially targeting 1.15.