- AUD/NZD rallied to fresh weekly highs in volatile markets.
- USD spike in Asia, weighing on commodity-FX.
AUD/NZD is rallying to fresh highs of 1.0638 as we see some activity in Asia in the antipodeans ahead of the Australian Trade Balance while the US dollar spikes towards the previous day's highs. DXY is printing 10.48 the high, AUD/USD 0.6292 the low and NZD/USD 0.5920.
AUD/NZD is printing the highest levels since November 2019 with markets anticipating the Reserve Bank of New Zealand to be more dovish that the Reserve Bank of Australia. All in all, both the NZD and AUD are contending with the same global forces. To date, both nations have done a good job on containing the spread of COVID-19, but it will boil down to the social distancing impact and the global economic shutdown.
What will be interesting to see is if its two major trade partners, China and Australia, can emerge from the locks downs simultaneously and maintain its own eco-trading environment in tact. China is ahead of the pack, both New Zealand and Australia are relatively unscathed of the virus compared to the rest o the developed world - so there is something about that which is promising for commodities and trade in the Asia Pacific.
Risk-on, risk-off, AUD and NZD tugged and pulled
Additionally, the acute stage of the COVID-19 crisis may be passing according to analysts at ANZ Bank. "While not necessarily imminent, we see a number of challenges still on the horizon. The global recovery is likely to be slower and shallower than hoped, and solvency is the issue that will come into focus. This will test the markets’ beliefs in central bank omnipotence."
However, the analysts also warned that a "renewed selloff in risk, triggered by solvency rather than liquidity concerns, will be sufficient to drive both the AUD and the NZD to fresh lows. But the degree of uncertainty around this is high and, for now, sentiment towards both currencies is positive. As such, we are raising our Q2 forecasts, and see new lows in both currencies in Q3."
AUD/NZD levels
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