NZD/USD: a favoured bullish trade - Nomura

Analysts at Nomura explained that from the NZD side of the equation, fundamentals are improving. 

Key Quotes:

"The NZD remains our preferred trade in the commodity bloc. With respect to commodities, the dairy market has rebalanced following its early 2017 shakeout and prices have rebounded. 

Recent poor weather points to milk production ending the 2016/17 on a softer footing, and this should keep prices supported over coming months. This is a positive for the NZD from a terms-of-trade perspective. 

Domestically, New Zealand data are also picking up, with Q1 CPI inflation positively surprising, labour market momentum firm and GDP growth set to rebound as transitory headwinds from early in the year recede. 

All up, we believe this should see the Reserve Bank of New Zealand (RBNZ) become more upbeat, relative to its current assessment, over the coming meetings and this should reinforce pricing for higher New Zealand interest rates in 2018."