NZD/AUD to target 0.93 multi-month - Westpac

Imre Speizer, Research Analyst at Westpac, suggests that the focus for AUD markets this week will be Tuesday’s RBA decision, which we expect to a rate cut to 1.5%.

Key Quotes

“Given markets have only priced in a 65% chance of that happening, AUD should be sold on the day, and NZD/AUD could move into a higher 0.9600-0.9700 range by the end of the week.

Apart from the RBA meeting there is also lots of data to watch. On Mon we have Jul MI inflation gauge and AiG PMI. But the key releases are Tue – Jun trade balance and building approvals – and Wed – Jun nominal and Q2 real retail sales.

3 months: We target 0.93 multi-month because the cross is trading well above fair value implied by relative interest rates, commodities and risk sentiment and needs to correct this deviation eventually. In addition, if the RBA signals its easing cycle is probably over, interest rate differential changes will favour the AUD over the NZD.

1 year: Our economic fundamentals based forecast is 0.92.”