The fundamental case has shifted towards the Aussie but since the AUD/NZD pair is positively correlated with global risk sentiment, economists at Westpac still view multi-week risks as firmly to the downside.
Key quotes
“AUD/NZD has risen with risk sentiment, sharply so since mid-March. But also probably helping has been Australia’s expected economic outperformance due to a less severe COVID lockdown, and tapered RBA bond buying vs the RBNZ.”
“Looking ahead for the week, the AUD/NZD pair is quite technically stretched and in need of a pullback, perhaps to the 1.0400 area.”
“There are sentiment and commodity arguments for a lower cross. AU/NZ yield spreads, though, should add 2.5c if the RBA remains at +0.25% and the RBNZ eases to -0.50% later this year – a prospect not yet priced in.”
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