Market outlooks for the antipodeans: watching Aussie CPI - Westpac

Analysts at Westpac offered their market outlooks for the antipodeans.

Key Quotes:

"AUD/USD 1 day:  Rising commodity prices and our expectation of an above-consensus CPI should see the AUD higher, above 0.7650 towards the 0.7700 area.  

AUD/USD 1-3 month: While further gains to around 0.77 are possible during the month ahead, driven in part by the faltering US dollar and yield-chasing flows, the AUD is losing energy (perhaps a reflection of its declining yield advantage). By year end, there’s a case for a correction towards 0.74 if the Fed tightens in December as we expect. (13 Sep)

NZD/USD 1 day: Should follow the AUD’s lead today, which means a test of 0.7200 is possible. 

NZD/USD 1-3 month:  Targets 0.6950 or lower as long as the RBNZ cuts to 1.75% in November and the Fed tightens to 0.625% in December, as we expect. (13 Oct)

AUD/NZD 1 day: Rising commodity prices and our expectation of an above-consensus CPI should see the AUD/NZD higher, above 1.0700 towards the 1.0765 area.  

AUD/NZD 1-3 month: Higher to 1.0750 or above, the RBA likely to remain on hold this year while the RBNZ should ease further. Moreover, the cross remains well below fair value estimates implied by interest rates, commodity prices and risk sentiment. (11 Oct)

AU swap yields 1 day: The 2yr and 10yr should open around 1.77% and 2.37%, respectively.

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. (15 Aug)

NZ swap yields 1 day: NZ 2yr swap rates should open unchanged at 2.10%, the 10yr at 2.72%.

NZ swap yields 1-3 month: Slightly lower for the 2yr. 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. (15 Aug)."