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Fresh Highs Since 2022, AU-NZ 2yr Spreads Still Trending Towards Flat

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The AUD/NZD got to fresh highs of 1.1136 in Monday trade, levels last seen in October 2022. We sit slightly lower now, last around 1.1130. A firm uptrend in the pair persists. Recent lows have been marked close to 1.1070, while the 20-day EMA is back just under 1.1000. 1.1200 seems like a natural upside target.

  • The cross continues to move in lockstep with AU-NZ 2yr swap spreads, which continue to trend towards flat. We were last at -11bps, highs in the spread going back to 2020.
  • The respective local data calendars just have NZ non-resident bond holdings out today. All eyes will rest on tomorrow's Q2 CPI print. Last week's dovish RBNZ shift has seen easing odds rise for the second half of this year.
  • Interestingly, while a soft result tomorrow (the market expects 0.5% q/q, prior 0.6%, while y/y is forecast at 3.4%, prior 4.0%), will weigh on NZD all else equal, it may also temper Q2 Australian inflation expectations, given the historical correlation for inflation between the two economies.
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The AUD/NZD got to fresh highs of 1.1136 in Monday trade, levels last seen in October 2022. We sit slightly lower now, last around 1.1130. A firm uptrend in the pair persists. Recent lows have been marked close to 1.1070, while the 20-day EMA is back just under 1.1000. 1.1200 seems like a natural upside target.

  • The cross continues to move in lockstep with AU-NZ 2yr swap spreads, which continue to trend towards flat. We were last at -11bps, highs in the spread going back to 2020.
  • The respective local data calendars just have NZ non-resident bond holdings out today. All eyes will rest on tomorrow's Q2 CPI print. Last week's dovish RBNZ shift has seen easing odds rise for the second half of this year.
  • Interestingly, while a soft result tomorrow (the market expects 0.5% q/q, prior 0.6%, while y/y is forecast at 3.4%, prior 4.0%), will weigh on NZD all else equal, it may also temper Q2 Australian inflation expectations, given the historical correlation for inflation between the two economies.