Westpac writes "the RBNZ is.............>

AUSSIE-KIWI: Westpac writes "the RBNZ is responsible for the 2 biggest daily

moves in AUD/NZD in recent months, firstly by delivering a -50bp OCR cut in Aug,

then by holding steady in Nov. The RBNZ doesn't meet again until Feb, so perhaps

AUD/NZD will avoid such dramatic moves into year-end. Relative commodity prices

have moved in NZ's favour in recent weeks, with dairy outperforming coal & iron

ore. But relative trade positions still point to AUD/NZD fair value being much

higher, well above 1.10, as Australia records trade surpluses so large that is

printing current a/c surpluses for the first time in 40 years, in contrast to

NZ's current a/c deficits of ~-3% of GDP. But monetary policy is likely to

remain the main driver of movement in the cross in coming weeks. We believe NZ

rates mkts have over-reacted to the RBNZ's steady hand in Nov, with only about a

1/3 chance priced for the Feb '20 OCR cut Westpac expects. The Feb RBA easing we

also expect is about 2/3 priced. US-China trade relations are another factor,

with any +ve news supportive of the cross. Overall, we see any further extension

of last week's losses towards 1.0550 as an opp to buy the cross for a reversion

towards fair value. Multi-week AUD/NZD could target 1.0800, multi-month 1.1000."