Brown Brothers Harriman’s (BBH) Elias Haddad notes the New Zealand Dollar (NZD) is stronger against major currencies, with local bonds underperforming as domestic data improve. The ANZ July business outlook survey points to ongoing Gross Domestic Product (GDP) recovery, while above-target inflation and firmer growth support expectations for further Reserve Bank of New Zealand (RBNZ) rate hikes priced into the swaps curve.

Stronger data lift New Zealand Dollar

"NZD is up against all major currencies and New Zealand bonds underperformed peers. The ANZ July business outlook survey was good, and indicative of an ongoing recovery in real GDP growth."

"Business confidence increased 19.5 points in July to a five-month high of 56.1, while Activity outlook rose 12.4 points to a five-month high of 49.3."

"Above target inflation and a more favorable domestic growth outlook argue for additional RBNZ rate hikes which is NZD supportive."

"The swaps curve price in 60bps hikes by year-end and a total of 100bps of tightening over the next twelve months to 3.50% - near the top of the RBNZ estimated neutral range (2.20%-4.10%)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)