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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
AUDNZD
The AUD/NZD has broken to fresh lows going back to late June. The pair last near 1.0825. A fresh test sub 1.0800 could see earlier June lows near 1.0735 targeted. The pair is sub all key EMAs (200-day near 1.0890).
- Today's data outcomes have worked in further of downside in the cross. Earlier NZ business survey figures were much stronger than the prior outcome. Confidence and expectations around the activity outlook surged, although the current activity backdrop was weak. We also had a dip in Q2 Australian Capex (-2.2%q/q versus +1.0% forecast).
- The NZ ANZ activity outlook at 37 is well ahead of the NAB Australia business conditions index, which last printed at +6 (next update for this survey is Sep 10). The chart below plots the AUD/NZD cross against this relative AU-NZ business condition differential.
- This differential does a reasonable job of coinciding with major AUD/NZD turning points and is currently arguing for much lower levels in the cross. The one caveat being the ANZ measure is the expected activity outlook.
Fig 1: AUD/NZD Cross Versus AU-NZ Relative Business Conditions
Source: MNI - Market News/Bloomberg
- Interestingly though, the AUD/NZD cross looks too low relative AU-NZ 2yr swap rate differentials, see the second chart below.
- there is some scope for spreads to compress lower, although this would imply less cutting priced in the RBNZ outlook, or conversely more easing priced into the RBA outlook.
- Next week we get Q2 GDP in Australia, as one of the next major releases to watch for the cross.
Fig 2: AUD/NZD Versus AU-NZ 2yr Swap Spreads
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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