Westpac note that "AUD/NZD tumbled on...>

AUSSIE-KIWI: Westpac note that "AUD/NZD tumbled on 13 Nov when the RBNZ defied

exp. by holding steady & sounding as though the bar to cut again soon was high.

The cross has managed only minor recoveries since then and the RBA vs. RBNZ

MonPol outlook should keep the pair trending lower in coming weeks. The RBNZ

meets on 12 Feb, its first meeting since Nov. A steady hand at 1% is almost

fully priced & only 50% chance of a cut to 0.75% by end-'20. In contrast, while

the RBA held its cash rate at 0.75% this week, market pricing extends to 0.45%

by end-2020. Big picture, relative trade positions still point to AUD/NZD fair

value being much higher than spot, well above 1.10. Australia's '19 trade

surpluses were so large that it printed current a/c surpluses for the first time

in 40 years, in contrast to New Zealand's current a/c deficits of around -3% of

GDP. However, relative commodity prices have moved firmly in New Zealand's

favour in recent weeks, with dairy prices more resilient than iron ore, coal &

metals which have slumped in response to the coronavirus. AUD/NZD has steadied

with a 1.03 handle in recent days. But multi-week risks are towards support

levels between 1.0200 and 1.0300. Further out, our end-June forecast is 1.0100."