AUDNZD: Closing To YTD Highs, AU-NZ 2yr Spread Near Cycle Highs

The AUD/NZD cross continues to push higher, last near 1.1145/50. We are very close to earlier YTD highs (1.1152). A clean break above this level could see 1.1200 targeted. Beyond that lies 2022 highs above 1.1400 (Sep 2022 highs were just short of 1.1500). 

• We are close overbought based off the RSI (14), last at 69.55). Also note we have an upcoming option expiry. 1.135 ($493m) Nov 25.
• We continue support for the AUD/NZD cross from higher AU-NZ 2yr swap rate differentials. This spread was last +47bps, close to cycle highs (see the chart below). Relative divergence between near term monetary policy outlooks continues to support such trends.
• Next week we have the RBNZ decision, with all economists surveyed by Bloomberg looking for a 50bps cut (8 economists surveyed so far), although our policy team noted earlier this week an ex RBNZ economist said the central bank would consider a 75bps cut.
• ANZ also expects NZ Q3 growth to be negative, leaving the economy in a technical recession (per BBG).
• In Australia, a number of local banks have pushed out their timing of when the RBA starts its easing cycle further into 2025. Note we get Oct CPI in Australia next Wednesday.
• Other AUD/NZD indicators are less positive in terms relative data surprise and business conditions, while relative commodity indices also sit in NZD's favor. Still, correlations with AUD/NZD sit firm with AU-NZ 2yr swap spreads this year.

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