Post #15991

Kiwi Rises on Hawkish Central Bank Pricing, but Growth May Override The Move The Kiwi caught a bid as major central banks broadly leaned hawkish, helping support most majors yesterday, including NZD/USD. Under the surface though, the backdrop is less encouraging. New Zealand GDP came in weaker than expected, pointing to a still-fragile recovery, while ongoing Middle East tensions add another layer of risk to the growth outlook. At the same time, inflation concerns are building, with markets now pricing a 50% chance the RBNZ could begin hiking as soon as May, with tighter policy more fully priced by September and December. That is the problem for the Kiwi longer term. Inflation and weak growth are a bad mix. While the hawkish shift helped lift NZD in the short run, the broader macro backdrop still keeps the currency under pressure. For now, NZD is up nearly 2% on the week and is on pace to snap a two-week losing streak. - Alan