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AUD/NZD Edges Higher, Q2 Wages & RBNZ In Focus Tomorrow

AUDNZD

AUD/USD has had a fairly quiet afternoon session so far, tracking a 0.7020-0.7040 range (last 0.7025). The currency is outperforming against most currencies in the G10 FX space though. AUD/JPY is holding close to session highs, last at 93.70/75, while the AUD/NZD cross probed above 1.1060. Note the 50-day MA in the cross comes in at 1.1059.

  • The strength in the AUD/NZD cross (+0.25% for the session) is a little at odds with relative yield/rate differentials today, which have drifted lower. -5bps in the government bond space for the 2yr tenor, while a similar move in the swap space.
  • The A$ has likely seen greater benefit today from the more positive China rhetoric, with the NDRC talking up efforts to stabilize the growth backdrop and further support for the property sector.
  • There hasn't been much follow through in terms of commodity prices though. Copper is back to flat on the day, while iron ore is holding under $108/tonne.
  • Looking ahead, as we highlighted late last week, tomorrow shapes up as a key day for the AUD/NZD cross with AU Q2 wages data. The market expects a 0.8% QoQ outcome (0.7% previously), which would take the YoY pace to 2.74% (from 2.4% in Q1). The RBA stated in the minutes that its liaison program suggested wages growth was continuing to rise. The recent NAB business survey painted a similar picture.
  • Also out is the RBNZ decision. The market expects a 50bps hike, but most of the focus is likely to rest on the bank's forward guidance (see our preview here for more details).
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