Correlations remain high across G10 currencies, with US factors driving most things and local factors playing second fiddle. NZ now sports a recession badge, and it is getting attention globally, and the current account is at a precarious level. But going the other way, markets are clearly keen to call time on the Fed, and that’s weighing on the USD. As this scuffle plays out, we expect ongoing volatility. 

At the margin, we suspect the USD adjustment lower (to fair value) will be the more powerful force, and that’s why we are forecasting a mild appreciation over 2023, but it’s a close call.