The AUD has been dragged higher by the NZD bounce post RBNZ. From the low 0.7080 region we got close to 0.7110 before selling interest capped the move. We are now back below 0.7090.
- The AUD/NZD cross is down -0.40-0.50% from the NY close, to sub 1.0950 and could challenge the 50 day MA, which comes in at 1.0916. We haven't tested below this MA level since March.
- Relative 2yr yield momentum is back in NZD's favor, see the chart below. The RBNZ surprised the market by lifting the peak policy rate projection.
- Earlier, Australian construction work done surprised on the downside, -0.9% versus +1.0% expected. The market reaction was minimal. Tomorrow Q1 CAPEX figures are due.
- RBA Assistant Governor Ellis also spoke, but went over well-worn ground in terms of the policy outlook during the Q&A.
Fig 1: AUD/NZD & 2yr Rate Differentials
Source: MNI - Market News/Bloomberg