- AUD/NZD has been correcting the November slide but struggles to follow through.
- Trade hype should underpin the upside potential for a sustained recovery.
AUD/NZD has been stabilising this month on the downside. AUD was buoyed on trade news has been struggling to get any additional lift vs the kiwi as markets remain wary of positioning ahead of key domestic data releases.
AUD/NZD is currently trading at 1.0427 and has been holding between a low of 1.0422 and a high of 1.0436 in early Asia. While trade has been the catalyst in markets of late, today we get back to core fundamentals with the RBA minutes today, and then it will be all eyes remain on AU labour data (due Thursday).
Risk-on supporting AUD over NZD
Meanwhile, the US stocks on Wall Street were closing at their highest all-time closes on the euphoria that a trade deal between the US and China will be signed next month. Government bond yields are slightly higher while the US dollar was mostly softer – AUD/USD ticked up to 0.6885 and the kiwi was net flat on the day at 0.6595.
The Australian government’s mid-year update revealed the broadly expected lowering of projected budget surpluses yesterday and weaker growth and slower wages relative to the April budget were reflected although AUD was showing little or no response to the MYEFO. Stronger than expected Chinese Nov industrial production data, with 6.2%yr the fastest growth pace since June will likely be an underpinning factor for the cross. Also, Dr Copper continued its northerly trajectory, buoyed by the trade deal news and hit the highest close since May of this year, up 1.07% on the day, though closing just shy of $6,200 – another supporting factor for AUD.
As for rates, the Australian three-year government bond yields remained around 0.78%, 10-year yields up from 1.17% to 1.23%. Markets are pricing a 40% chance of easing at the Feb Reserve Bank of Australia meeting while for the Reserve Bank of New Zealand, the market pricing implies only a 10% chance of easing in February.
AUD/NZD levels
Share
