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EUROPE SUMMARY: Stg Straddle Buying Continues


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AUSSIE-KIWI: On Tuesday Westpac noted that they are looking to enter a long
AUD/NZD position.
- Westpac writes "AUD/NZD is testing rising support but could still flush toward
Q218 lows around NZ$1.0500 if risk aversion continues. In the interim we watch
this trade an opportunistically enter on either a flush below NZ$1.0550 or a
shift in risk aversion. Risk aversion and Sino-US trade concerns have weighed
more heavily on AUD than NZD, the recent sharp slide in oil, base metals and
bulk futures are also weighing on AUD. But today's GDT surprised on the downside
suggesting that global dairy demand may be faltering at the same time as NZ
production is rising; The recent shift in RBNZ's profile on the back of sound NZ
data pushed the AU/NZ 10yr yield spread towards 10bps (NZ above AU) but is now
pulling back towards par. NZ mortgage competition has seen a pullback in
mortgage rates and could trigger a bout of refixing weighing on NZ yields."
MNI London Bureau | +44 0203-865-3809 |