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Sean Callow, Research Analyst at Westpac, points out that RBNZ governor Adrian Orr’s first policy statement on 10 May provided the spark for AUD/NZD to break its ranges to the top side.

Key Quotes

“By declaring that the “direction of our next move is equally balanced, up or down”, the RBNZ provided a clear contrast to the RBA messaging. This should persist at least for the next few months, helping AUD/NZD maintain notably higher ranges.”

“The RBA’s message has not changed; indeed in its own quarterly statement in May, the RBA stuck to its bullish 3.25%yr Australian GDP forecast for both 2018 and 2019. It has also made clearer its view that its baseline view is that “higher interest rates are”¦likely to be appropriate at some point.”

“This has been the main driver of AUD/NZD’s recovery from estimate undervaluation to be about in line with fair value. But there has also been modest support from relative commodity prices and a slight easing in US-China trade tensions.”

“If this remains the case then near term AUD/NZD should consolidate gains around 1.08 but then push towards 1.10 multi-week.”