Antipodeans outlook: Aussie to 0.74 and Kiwi to 0.70? - Westpac
|Analysts at Westpac offered their market outlooks.
Key Quotes:
"AUD/USD 1 day: A break below the 0.7600 area would signal a a decline towards 0.7500.
AUD/USD 1-3 month: The RBA’s easing bias combined with the Fed’s tightening bias should push the AUD lower towards 0.74 by year end, although recent BOE and BOJ easing have made the AUD even more attractive to global investment flows such that a test of 0.78 is possible first.
NZD/USD 1 day: Upwards momentum intact, and likely to threaten the 0.7325 area.
NZD/USD 1-3 month: The RBNZ’s easing cycle combined with the Fed tightening in December should push the NZD lower towards 0.70 by year end, although recent BOE and BOJ easing have made the NZD even more attractive to global investment flows such that a rise to the 0.75 area is possible first.
AUD/NZD 1 day: Downward momentum strong, signalling a move below 1.0400.
AUD/NZD 1-3 month: The RBNZ is likely to cut again in November, and should maintain a more dovish outlook than the RBA. In addition, the cross is well below fair value implied by interest rates, commodity prices and risk sentiment. We target 1.08.
AU swap yields 1 day: The 2yr should again open around 1.61% - just above the 1.60% record low - while the 10yr should open around 2.06%.
AU swap yields 1-3 month: If the RBA sits tight at 1.5% during the remainder of this year the 2yr should eventually find a base around 1.60%. However the main risk is that markets continue to price in a sub-1.5% cash rate.
NZ swap yields 1 day: NZ 2yr swap rates should open unchanged at 1.98%, while the 10yr should open unchanged at 2.42%. The new NZGB 2037 will be launched today via syndication, and it will be NZ’s longest ever NZGB, extending the yield curve from 17 years to 21 years.
NZ swap yields 1-3 month: Slightly lower. The OCR is likely to be cut to 1.75% in November. That should result in a 2yr swap rate of around 1.90%, although the risk is it could be lower if markets expect a 1.5% terminal OCR."
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