The Aussie has depreciated against its New Zealand’s counterpart on Wednesday, to test key support at 1.0565 area. The FX analysis team at Westpac, however, considers that the current bearish pressure is likely to be short-lived and expects the Australian dollar to appreciate steadily through the first quarter of 2021.
Key quotes
“The RBA recently shifted its stance in a more dovish direction, cutting the key policy rates and significantly expanding its QE programme. In contrast, the RBNZ MPS this week will need to acknowledge the economy (especially housing) has been stronger than forecast, and while it will announce a cheap bank funding scheme (FLP), we expect signalling about a negative OCR to either remain unchanged or be softened. Yields’ spreads near term should thus favour the NZD over the AUD.”
“Longer term, though, the opposite could be true, if the RBNZ cuts the OCR to -0.50% by August 2021 (our current forecast). That should push the cross to 1.10 by March 2021. (10 November).”
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