AUD/NZD should trend towards the 1.1250 area - Westpac

US-China trade tensions remain a potential weight on the cross but if China avoids a major growth disruption, AUD/NZD should trend towards the 1.1250 area multi-week/month, according to Sean Callow, Research Analyst at Westpac.

Key Quotes

“AUD/NZD was already trending higher when it was given substantial fresh fuel from the RBNZ’s dovish Monetary Policy Statement on 9 Aug.”

“Governor Orr said the cash rate was expected to be steady into 2020 and repeated that the next move “could be up or down.”

“The RBNZ also lowered its GDP forecasts and RBNZ’s McDermott said that the chances of a rate cut have increased. Markets now price around a 20% chance of the RBNZ cutting rates by Feb 2019.”

“This is in stark contrast to the RBA’s message on its cash rate, where Governor Lowe insists the debate is only over when it raises rates. As a result, yield spreads are trending in AUD’s favour.”

“Relative commodity prices are also increasingly supportive of AUD/NZD, but not so dramatically as relative monetary policy stances.”