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Westpac On AUD/NZD - Still Constructive

AUDNZD

"Divergence in policy stances between the RBA and RBNZ have driven sharp swings in the AU-

NZ 2-year swap spread since the pandemic mostly skewing in the Kiwi’s favour...The RBA’s newly hawkish stance should ensure the worst is over for AUD/NZD from this angle. Meanwhile, our estimate of AUD/NZD fair value has risen this year (now 1.12), as China’s switch to stoking growth has boosted prices of Australia’s industrial commodity exports relative to NZ’s. Australia is already running trade surpluses while NZ’s current account deficit expanded beyond -7% of GDP in 2022, leaving NZ$ more exposed to global sentiment. The RBNZ fallout could see AUD/NZD extend to

1.0880 support near term, but multi-week/month we still see scope for a run at 1.1200."

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