NZD Embraces Steep Uptrend amid Falling Expectations for Negative Rates

WikiFX News (28 Nov.) - NZD/USD is set for its fourth week of gains in a row amid the falling likelihood of the RBNZ‘s negative interest rates and the government’s improved pandemic control. Moreover, the pair is expected to extend the gains in the long run.

The RBNZ sees a lower necessity of negative rates on the stronger economy, assuming a Funding for Lending Programme could lead to a substantial drop in mortgage rates. Besides, the New Zealand dollar is heavily favored with the governments pandemic response constructing a model for other countries

What‘s more, the US is likely to launch a new round of fiscal stimulus in the wake of Biden’s victory. Thus the risk-sensitive NZD will benefit from the positive risk sentiment in the short term.

In the medium term, house prices in New Zealand have surged unprecedentedly since March. Such an overheated property market is largely attributed to the RBNZ‘s rate cuts and quantitative easing. As the global economy is now projected to recover in 2021, the NZD/USD is expected to embrace a medium-to-long-term uptrend on the RBNZ’s tightening monetary policy.

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Chart: Trend of NZD/USD