ANZ: Upward Drift

ANZ note that "April has been a much more positive month for the NZD, outperforming most of the G10 and pushing AUD/NZD back below NZ$1.08. The market appears to have digested the surprise changes to New Zealand housing policy announced at the end of March and turned its attention back towards reflation themes."

• "From an economic perspective, there isn't much to differentiate the two currencies."
• "Otherwise, the drift lower in AUD/NZD has been surprising, given the strength in industrial commodity prices. Normally this would be ammunition for the AUD, but food prices and soft commodities have also rallied and are therefore offsetting the relative commodity equation."
• "What may be more influential over the next month is the policy calendar, which points to an incremental good news flow for the AUD. In a fortnight, the RBA will deliver the May Statement of Monetary Policy, which will formalise the strength in labour market conditions through forecast upgrades to the unemployment rate. The Australian Federal Budget will be delivered in the same week and is expected to show a rapid improvement in the fiscal position, along with a spate of new spending measures and tax cuts to promote job creation. The only policy event on the New Zealand calendar over the next fortnight is the RBNZ's Financial Stability Report, which is unlikely to provide much positive catalyst for the NZD."
• "Given this backdrop, our bias is for some modest upward drift in AUD/NZD towards the top of the 2021 trading range. The intersection of the 100- and 200-day moving averages at NZ$1.0750 looks to be a pretty decent entry level."