NAB: Further Upside Expected This Year

NAB note that they “have been positive on the AUD/NZD cross rate since September last year and have been projecting some strength over the medium-term. That has been playing out and we remain positive.”

• “There is a long laundry list of factors that could favour further strength in the cross rate. It remains cheap on our short and long-term models and NZ faces greater macro headwinds this year compared to Australia - the earlier start to the tightening cycle in NZ and another year of heavily restricted tourism are two obvious factors undermining NZ’s growth outlook. Australian-NZ rate spreads have already turned higher and forward rates suggest further upside.”
• “Hitherto, our projections have been consistent with the cross rate moving sustainably into a higher NZ$1.06-1.11 trading range later this year. Could the AUD/NZD cross rate break above NZ$1.11 this year? Yes, based on the macroeconomic outlook we think that is a serious risk to consider.”