- AUD/NZD edging higher at the start of the week in Asia.
- AUD is favoured over the bird for RBA’s outlook and remains elevated.
AUD/NZD has started out the day on the bid, taking back space towards the prior highs albeit with a lack of force in otherwise quiet markets. At the time of writing, AUD/NZD is trading at 1.0632 between a low of 1.0601 and a high of 1.0633, a touch up since Friday’s close while New Zealand is out on holiday.
Commodity currencies have been seeing limited action of late, although the Aussie has been the favourite, bought last week by both funds and asset managers in anticipation of easier lockdown measures and the Chinese economy leading Australian business back to work. As analysts at ANZ Bank put it, “AUD and NZD score well on G20 virus report card.”
Commodities in focus
Both nations have seen relatively few cases of the virus despite their close proximity to China and a large tourism percentage. The nations both took early measures to mitigate the contagion which has paid dividends for their respective currencies as far as FX markets go and despite the fall out in global economic trade and the oil price.
Last week’s ANZ China Commodity Index ended the week down 4.1%, “with only the precious metals sector ending in positive territory. Gold’s strong gains were offset somewhat by weakness in the PGMs,” analysts at the bank explained.
“Energy suffered the biggest fall (-16.9%), with crude oil and gas down sharply. Bulk commodities (-2.6%) were dragged down by falls in both coking coal and iron ore. Industrial metals were mixed; but, gains in nickel and aluminium were more than offset by falls in copper. Agriculture was weaker, as palm oil, sugar and hogs fell.”
All in all, he focus has been on the crude markets which finished the week on something of a high, with the June WTI contract all but testing $18 Friday though Brent closed the week below $22. “Helping sentiment were signs that production is being cut back rapidly by the industry,” analysts at Westpac explained.
“Baker Hughes data released Friday saw 60 rigs idled, meaning that the US has almost halved the number of rigs so far this year. OPEC/ OPEC+ production cuts also come into effect on Friday this week which should also help the current glut of crude though the key focus will be on Cushing deliveries for May contract settlement (first delivery day is Friday) which will maintain near term pressure.”
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WTI Price Analysis: Bulls testing a 61.8% Fibo and closing the gap
Meanwhile, for the day ahead, the Bank of Japan is delivery its interest rate decision a day earlier than usual, more on that here: BoJ Preview: A number of changes expected, but no fireworks
As for the Reserve Bank of New Zealand, its dovishness in recent meetings and the sentiment challenges facing the bird, should the risk-on environment we’re now in charge, there is potential for further upside in this cross. The Reserve Bank of Australia is forecasting 6–7% in 2021 which is keeping the currency elevated as well.
AUD/NZD levels
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