New Zealand Dollar May Look Past CPI, Focus on Stocks, USD & Fed

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New Zealand Dollar Fundamental Forecast: Bearish

  • Despite stock market selloff, New Zealand Dollar appreciated as US Dollar fell short
  • NZD may look past upbeat domestic inflation data to focus on Fed speech next week
  • Signs of a hawkish Fed may reignite gains in USD despite stock losses, hurting NZD

We just released our 4Q forecast for equities, which may impact NZD, in the DailyFX Trading Guides page

Despite an aggressive global market selloff, in which the SP 500 was on course to deliver its worst weekly performance (as much as -5.44%) since March, the ‘anti-risk’ New Zealand Dollar (and the Australian Dollar) generally appreciated. Under normal situations, one would expect the yields in which these currencies enjoy to work against them as carry trades are unwound amidst investors prioritizing preserving capital.

But thanks to rising interest rates from the Fed, the US Dollar now plays two important rolls in trading. First, it holds the highest yield. Second, it is the world’s reserve currency. It seems

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