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AU Data Surprises At Relative Record Highs To NZ

AUDNZD

AUD/NZD is tracking lower. After touching close to 1.1090 in early trade we are now back to 1.1060, down slightly for the session. Short term moves could be dictated by broader risk appetite, particularly by cross yen flows, which the A$ may show greater sensitivity to relative to NZD. However, the fundamental skew for the AUD/NZD still looks higher.

  • The first chart plots the AU-NZ 2yr swap spread, which pushed back to -40bps, overlaid against spot AUD/NZD. This is highs in the spread going back to June last year.
  • In the government bond space, the spread picture less supportive for AUD but remains on a positive trend.

Fig 1: AUD/NZD & AU-NZ 2yr Swap Spread

Source: MNI - Market News/Bloomberg

  • Relative data surprises remain heavily skewed in AUD's favor. The second chart overlays AUD/NZD against the relative AU-NZ Citi EASI differential. This differential is at record highs. Since 2021 the correlation with the AUD/NZD cross has also been quite reasonable.
  • Earlier today, the ANZ Truckometer dipped -2.7% in June. The Bank noted "...suggests it’s a line ball call whether GDP managed to grow at all in the quarter." It added that "there are lots more GDP indicators to come."
  • The Citi AU EASI has been buoyed by yesterday's record trade surplus figures, but other data has generally painted a more upbeat picture relative to NZ.
  • Importantly, NZ is more reliant on Australian growth, than the other way around.
  • This should keep AUD/NZD dips supported, note the 50-day MA come in at 1.1037, while previous highs - 1.1150/75 could be eyed on the topside.
  • Next week in NZ the main focus will be on Wednesday's RBNZ decision (+50bps hike expected), while in Australia, Westpac consumer sentiment and NAB business confidence is due Tuesday, followed by June jobs data on Thursday.

Fig 2: AUD/NZD & AU-NZ Citi EASI Differential

Source: Citi/MNI - Market News/Bloomberg

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