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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 cross hit fresh lows back to April of this year in the first part of trading today, falling close to 1.0800, before stabilizing. We were last at 1.0830/35, which is still more than 200pips down in a little over a week.
- The proximity of this week's RBNZ meeting is weighing. The chart below plots AUD/NZD against the AU-NZ 2yr swap spread. This spread is close to recent lows around -125/-130bps. A break lower in this spread would likely drive further AUD relative weakness.
- At this stage, market pricing for this week's RBNZ meeting is around +66bps, based off OIS, so not yet in line with economic consensus of +75bps.
- In contrast though, RBA market pricing for the December meeting is not yet at a full +25 bps (both futures and OIS a little over +20bps). Hence RBA market pricing is under a third of what is priced in for the RBNZ.
- The other headwind for AUD in the near term, is renewed China Covid headwinds, which risks unwinding some of the recent relative outperformance in AU's commodity basket (iron ore is down 3.7%, back sub $95/tonne).
Fig 1: AUD/NZD Versus AU-NZ 2yr Swap Spread
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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