Outlook for antipodeans - Westpac

Analysts at Westpac offered an outlook for the antipodeans.

Key Quotes:

"AUD/USD 1 day:  The quiet calendar suggests AUD trades mostly the low-mid-0.76 area, though multi-day, a soft undertone to the USD should help it test 0.7700.

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: The kiwi has traded poorly since the RBNZ’s freshened signal that it is likely to cut in November, but a quieter local calendar and likely softer USD should help it steady above 0.72.

NZD/USD 1-3 month: During the month ahead another probe above 0.75 is possible, driven by good NZ economic news, a still-vulnerable US dollar, and yield-chasing inflows. By year end, there’s a case for a correction towards 0.70 if the Fed tightens in December as we expect. (13 Sep)

AUD/NZD 1 day: An unwind of short AUD/NZD positions could extend gains above 1.0550. The RBNZ and stalled dairy prices are partial explanations for the recent acceleration.

AUD/NZD 1-3 month: By year-end, we expect a rebound towards 1.06, the cross well below fair value implied by interest rates, commodity prices and risk sentiment.  (22 Sep).

AU swap yields 1 day: The 2yr should hold around 1.68%, the 10yr consolidating around 2.17%.

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 hold around 2.02% after Thursday’s fall, while the 10yr should be about flat at 2.51%.

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. (15 Aug)."