NZD/USD to test 0.6585 during the week ahead – Westpac

The NZD/USD has surged above the 0.65 level, trading up +0.52% on Thursday as global risk sentiment has rebounded, dominating other global negatives such as second coronavirus waves or Sino-American issues. Economists at Westpac expect the kiwi to test 0.6585 next week. 

Key quotes

“The rise in sentiment is fuelled by global government and central bank stimulus, and that factor appears to have dominated negatives recently, such as second Covid waves (including a few cases imported to NZ which may delay any border relaxations) and US-China tensions.”

“NZD/USD has perked up over the past few days, following the rebound in equity markets. There’s potential to test 0.6585 during the week ahead.”

“Should the NZD remain elevated, the implication is inflation forecasts will be subject to downgrades, in turn requiring further policy accommodation. That will be a negative story for the NZD early in 2021.”