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Support in the 1.0950-70 region

AUDNZD

AUD/NZD continues to drift lower, down a further 0.2% since this morning’s open. We sit back at 1.0970, with the 1.0950/70 region generally seeing support emerge over the past week.

  • The move lower in the cross comes despite a decent move lower in NZ yields. Whilst this may represent some catch up after NZ markets were closed last Friday, yield differential momentum is more in AUD's favor at present, see the chart below.
  • The AU-NZ 2yr spread is only modestly up on recent lows though, so we may need to see further positive momentum before it benefits the cross rate more meaningfully.
  • This week's data calendar holds some important releases. Retail sales in Australia will be a focus point, which is out on Wednesday. The market looks for a 0.4% rise versus 0.9% prior.
  • In NZ the main focus will be on Thursday's ANZ activity and business confidence prints for June and ANZ consumer confidence for the same month. House price data and building permits are also due on the same day.
  • The confidence numbers will be watched given the Q1 GDP fall in NZ. The RBNZ outlook, according to market pricing has a higher peak in rates relative to the RBA outlook, but it does price in more weakness beyond the 1yr horizon.

Fig 1: AUD/NZD & Yields Differentials

Source: MNI - Market News/Bloomberg

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