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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.
AUDNZD
Macro drivers for AUD/NZD have been skewed lower in recent weeks. The chart below plots the spot AUD/NZD cross against the 2yr AU-NZ swap spread (the green line on the chart) and the ratio of AU to NZ commodity prices (the orange line), proxied by a DB Australian series and a ASB series for NZ.
- The 2yr swap spread has fallen sharply in recent week, back close to -100bps, versus -60bps in mid Jan. Hawkish RBNZ rhetoric (from the Chief Economist) and positive data surprises have aided the move in NZD's favor. AU data outcomes have been slightly more mixed, although the RBA hasn't ruled out tightening further.
- On the relative commodity front, the skew has also been in NZ's favor as well. Overnight we had another solid rise in while milk powder prices at the GDT auction (see this link). The trend in dairy prices has been positive for a number of month and Westpac has revised higher its 2023-24 milk price forecast this morning.
- On the AU commodity price side, softer China sentiment and a resurgent USD since the start of the year (which has had an impact on base metal prices) has hurt sentiment. The focus is likely to be on China efforts to aid the local equity market backdrop and the broader economy. If successful, this is likely to benefit the AUD more so than NZD.
- Technically, spot AUD/NZD sits near 1.0700 in current dealings. A clean break sub this level could see Dec 2023 lows at 1.0656 targeted. Oct lows were at 1.0624. On the topside, the 20-day EMA is back near 1.0740, while the 200-day sits close to 1.0800.
Fig 1: AUD/NZD Versus AU-NZ 2yr Swap Differential & AU/NZ Commodity Prices
Source: DB/ABS/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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