AUD/NZD: Gravity playing its part on key week ahead

• AUD/NZD at the mercy of market perception of central bank themes.
• The FOMC to take the spotlight while trade wars momentarily take a back seat.

Its a holiday in New Zealand, Labour Day, but that doesn't distract traders from a burdened outlook on broader risks for the week ahead. Indeed, it's a jam-packed week which will include Chinese PMIs as well as the showdown event determining the direction ot the might US dollar.

"We expect the Fed to lower rates by 25bp again next week, delivering the third consecutive rate cut since July," analysts at TD Securities noted – "The FOMC is likely to communicate patience in deciding future policy moves after next week's cut as they assess the impact of the three cuts they have already delivered. We look for the Fed to temporarily pause before resuming rate cuts in Q1 2020."

The antipodeans are a proxy to the main theme of "trade headline" markets, given their close relationship to the commodity complex. At this juncture, the bird has perked up having been beaten down over the last weeks, which is a likely correction of general positioning – However, the Aussie has come under the cosh given a dovish backdrop from in the market's outlook on of late.

Central bank play-off

In this respect, the Australian 3-year government bond yields have risen from 0.71% to 0.75% in recent trade, closing at 0.72% on Friday and markets are pricing 4 basis points of easing at the 5 November Reserve Bank of Australia meeting The market pricing for the Reserve Bank of New Zealand is for 22bp of easing on the 13th November, so its pretty much even keel there, hence profit-taking has ensued.

AUD/NZD levels