AUD/NZD cross to push back to 1.09 multi-week - Westpac

Sean Callow, Research Analyst at Westpac explains that the RBNZ’s surprisingly dovish tone in its quarterly Monetary Policy Statement came just in time to help AUD/NZD avoid a break of 1.06.

Key Quotes

“The RBNZ’s pushback against hawkish market pricing should weigh on the kiwi for some time, while the RBA’s neutral stance is essentially uncontested in market pricing for 2017.”

“But AUD/NZD fair value has fallen notably in recent weeks, with relative commodity prices tilting in the kiwi’s favour. Dairy prices for instance have rallied as iron ore prices have slumped to 7 month lows.”

“Our AUD/NZD fair value estimate is now in the mid-1.09s, a low since July 2016, though obviously still pointing to upside potential on the pair. We see scope for iron ore prices to recover some lost ground near term and for Australia’s data momentum to be decent enough to keep the RBA’s optimism intact.”

“This should see the cross push back to 1.09 multi-week but 1.10 should remain elusive for now.”