AUD/NZD: Supported by RBA-RBNZ divergence - Westpac

According to Sean Callow, Research Analyst at Westpac, 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, a view reiterated at the June RBA Board meeting. 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 looked to be the main driver of AUD/NZD’s rally in mid-May. But there might have also been modest support from relative commodity prices and a pause in US-China trade negotiations.”

“Persistence of the apparent RBA-RBNZ divergence would be supportive of AUD/NZD.”