Goldman: Stay Long Into CPI Reports

Goldman Sachs note that they “recently recommended investors go long AUD/NZD with a target of NZ$1.12, and while a reversal in equities over the past week have mostly erased last week’s gains, we continue to think it looks like an attractive expression for our views.”

• “China reopening should remain a positive impulse for AUD, and we continue to see upside risks to terminal rate pricing in Australia. Market pricing of terminal has declined in recent weeks, but we think this is mostly a result of the global rates rally and the shape of the rates curve, as well as some beta to Japanese rates, rather than a shift in the market’s view on the RBA.”
• “Additionally, while the December labor force survey was weaker-than-expected, our economists think that the labor market remains very tight, with the unemployment rate well below their estimate of a sustainable level.”
• “NZD, meanwhile, seems vulnerable to a narrowing in terminal rate pricing, given that the RBNZ appears to be on a less sustainable path toward tighter policy, particularly due to housing market vulnerabilities.”