The selling pressure continues to intensify for the New Zealand, Australian and Canadian dollars. Of all of the G10 currencies, we are most bearish the New Zealand dollar. The Reserve Bank of New Zealand has now become the most aggressively dovish central bank of the G10 after announcing that more rate cuts are to come. The futures curve is now pricing in a 100 percent probability that rates will be reduced at the next monetary policy meeting. The central bank has become serious about recessionary risks and even though their measures will help the New Zealand economy in the long run, in the short term, we expect the New Zealand dollar to hit 70 cents against the greenback and breach 1.30 against the Australian dollar. The Australian and Canadian dollars are also lower even though gold and oil prices have held steady. For Canada, the rise in oil prices has masked underlying weakness in exports which means that if oil prices stay at current levels, we could start seeing serious weakness in Canadian data.
