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In Antipodean space, strategists at Credit Suisse look at the impact of the transTasman bubble on NZD, and see further downside risk in AUD/NZD towards 1.07.

Scope for modest rate repricing in favour of NZD if current arrangements hold

“The opening of the Australia-New Zealand travel bubble has renewed some hopes for the kiwi growth outlook. High propensity of both aussie and kiwi governments towards aggressive travel restrictions will leave markets in reactive rather than proactive mode towards travel bubble news.”

“We think that if the travel bubble holds, there is scope for NZD to continue to outperform AUD in coming weeks, as RBNZ policy expectations have scope to adjust.”  

“We think that a convergence in AUD/NZD towards the 200-DMA on a weekly chart around 1.07 is quite possible.”  

“A suspension of the travel bubble might trigger a reversal of recent weakness in the cross, but fundamentally we remain of the view that AUD/NZD is more likely to mean revert than to trend, especially as further developments on the travel front (e.g. further expansion of travel bubbles, Covid passports etc) are likely to have similar overall implications for both Australia and New Zealand, perhaps eclipsing the specificity of the current travel arrangements between the two Oceanic nations.”