Bank of Japan Eyes April Rate Hike Despite Inflation Dip, ING Says 
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty 
Energy Sector Outlook 2025: AI's Role and Market Dynamics 
Bank of America Posts Strong Q4 2024 Results, Shares Rise 
Paraguay Central Bank Holds Interest Rate at 5.5% Amid Slowing Growth 
Global Markets React to Strong U.S. Jobs Data and Rising Yields 
Goldman Sachs Delays Bank of England Rate Cut Forecast Amid Middle East Inflation Risks 
Fed Rate Cut Hopes Fade as Oil Prices Stoke Inflation Fears 
J.P. Morgan Now Expects Two ECB Rate Hikes Amid Inflation Pressures 
U.S. Stocks vs. Bonds: Are Diverging Valuations Signaling a Shift? 
Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes 
China Holds Benchmark Loan Prime Rate Steady for Tenth Consecutive Month 
Fed Holds Rates Steady as Middle East Conflict Clouds Inflation Outlook 
2025 Market Outlook: Key January Events to Watch 
Having been a choice expression for the dollar’s dominance over high-beta FX in 2018, the outlook for NZD is now more nuanced as other previously more hawkish central banks have abandoned hiking biases.
We raise our 2019 NZDUSD forecasts by 2-4c while preserving a downward slope. By end of 3Q’19, our forecast is towards 0.63 levels. Please be noted that FX options hedging activity of this pair is also in sync with the above projections. 6m IV skews have clearly been indicating bearish risks. Hence, major downtrend continuation shouldn’t be panicked the broad-based bearish outlook amid minor rallies.
These positively skewed IVs of 6m tenors signify the hedgers’ interests to bid OTM put strikes up to 0.63 levels (refer above nutshells evidencing IV skews).
Dovish shifts in policy guidance from the Fed and RBA, which we did not anticipate, have removed the RBNZ’s status as the most dovish central bank in G10. The pullback in the US real rate outlook has also buoyed commodities generally, as captured in the J.P Morgan commodity curve index (refer above chart).
Even as the NZ data rebounded over the latter part of 2018, Governor Orr declared that the OCR will need to be on hold until 2020 in order to sustainably hit the inflation target.
Hence, for those who foresee the long-term exposures, ahead of RBNZ monetary policy that is scheduled for this week, contemplating above factors, we advocate initiating shorts in NZDUSD futures contracts of June’19 delivery as further downside risks are foreseen and simultaneously, longs in futures of Mar’19 delivery. Thereby, one can directionally position in their FX exposures. The directional implementation of the same trading theme by further allow for a correlation-induced discount in the options trading also if you choose strikes appropriately.
Currency Strength Index: FxWirePro's hourly USD spot index is inching towards 129 levels (which is neutral), while hourly NZD spot index was at 47 (bullish) while articulating (at 09:58 GMT).
For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex
