Goldman Taking Profits, Sticking To Our View

Goldman Sachs note that “since we recommended a tactically long AUD/NZD trade, policy rate pricing has moved in our favour. Employment growth in Australia also surprised materially to the upside, but the abrupt reversal in price action following the print may suggest some near-term exhaustion on this theme due to the broader risk backdrop. Given the progress made, we are closing the trade for a potential gain of 1.4%. We continue to think that monetary policy convergence will drive AUD/NZD higher, but near-term catalysts seem limited. Our economists see upside risks to New Zealand’s CPI release, and while we think it is likely that the RBA resumes its hiking cycle at some point this year, it is most likely to occur later this summer. With our more medium-run view still intact we will look for opportunities to reengage when the circumstances look favourable.”