NZD/AUD corrective rebound continues to target 0.9245 - Westpac

The NZD/AUD cross’s corrective rebound continues to target 0.9245 next as AUD is trading close to fair value estimates but the undervalued NZD is playing catch-up to fair value, thus resulting in the recent rise in the cross, explains Imre Speizer, Research Analyst at Westpac.

Key Quotes

“Key events for the AUD during the month ahead include: Nov trade (5 Jan), Nov retail sales (11 Jan) and Dec labour force (18 Jan), with Q4 CPI on 31 Jan and the next RBA meeting on 6 Feb.”

“3 months ahead: We target 0.89 during the next few months. Australia’s key commodities could outperform NZ’s (particularly if iron ore prices rise in sympathy with steel prices at multi-year highs).

AUD should also benefit from stability in short end rates, as markets ignore the notion of a rate cut and remain focused on the timing of the rate rise that the RBA says is most likely the next move. Soft inflation ensures a hike remains a nearzero chance in market pricing until May 2018 but pricing for H2 2018 should remain fluid in coming months.”