Westpac write "last month, the kiwi.....>

AUSSIE-KIWI: Westpac write "last month, the kiwi jumped on New Zealand's strong

Q3 labour market data which set up the RBNZ to drop its rate cut threat the next

day. Last week, the Aussie slumped on Australia's surprisingly weak Q3 GDP

report which saw rates markets wipe out pricing for an RBA rate hike in 2019.

Yet the net impact on the 2 year AU-NZ yield spread has been quite small, with

both the RBA and RBNZ signalling a steady hand for some time - in the case of

the RBNZ, steady "into 2020." Meanwhile, relative commodity prices have swung in

AUD's favour over the past 6 months or so. As a result, AUD/NZD is currently 7%

below 1.12 fair value - the third largest deviation over the past decade. Price

action this year has often hinted at AUD being preferred to NZD as the proxy for

the state of US-China trade relations. This suggests that a major breakthrough

might be required before the 1 March deadline to spark AUD/NZD revival. Still,

our fair value estimates leave us expecting the pair to recover back towards

1.10 during Q1 2019."