Strategists at Credit Suisse do not see a strong reason for the RBNZ to push back against the sharp recent hawkish repricing in RBNZ policy expectations at the 14 July rate decision, but nevertheless note that tactical risks have become very asymmetrical, and suspect that AUD/NZD might be vulnerable to spikes higher if the meeting outcome fails to properly validate market expectations. They continue to like fading AUD/NZD rallies to 1.08.
Fundamentally constructive on NZD vs AUD
“We think the data, especially coming from the Q2 survey, should provide the RBNZ with sufficient confidence to sound constructive at next week’s meeting, even amid ongoing uncertainty in the travel sector. The sharp increase in tightening expectations that has taken place over the past week or so (OIS markets are pricing in a 25% probability of a rate hike by August at the time of writing, up from approximately 8% a week ago) however raises the question of whether the RBNZ will be actually able to meet the market’s aggressive outlook.”
“We adopted a 0.6850-0.7215 NZD/USD target range for Q3, with a fundamental preference for NZD over AUD. We also acknowledged the asymmetrical risks around RBNZ policy decisions, by opting to favour a strategy of selling rallies in AUD/NZD to 1.08 over taking outright directional views: taken together, this set of views overall still seems appropriate.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.