Forex Flash: NZD/USD weekly outlook subject to both domestic and external stimuli – BNZ

The week ahead is shaping up as a busy one for markets – local highlights will be Thursday’s ANZ business survey, and Friday’s OTI trade data. According to the BNZ Research Team, “We expect business confidence to remain robust (albeit with some negative impacts from the drought), and the OTI terms of trade to bounce some 7.3%. Outcomes along these lines have the potential to drive the NZD higher.”

However, global risk sentiment remains the bigger driver of the currency. There are plenty of influences on risk appetite to balance this week, which include the Italian election results, a Testimony from Fed chairman Bernanke, a possible announcement of the new Bank of Japan Governor, the release of February manufacturing PMIs (including the HSBC ‘Flash’ measure for China), and the countdown to the deadline for US spending cuts.

All up, “we find the downside a little more compelling in the near-term. For one, the NZ data tone looks unlikely to maintain its red-hot pulse. And while Bernanke may reintroduce downward pressure on the USD, the Italian elections and US sequester deadline pose negative risks for sentiment.” the team adds.