Outlooks for the antipodeans and rates - Westpac

Analysts at Westpac offered outlooks for the antipodeans and rates.

Key Quotes:

"AUD/USD 1 day:  In a more neutral state after yesterday’s sudden bounce, and likely to hold around the low 0.7500’s ahead of this afternoon’s critical (for the RBA) CPI data. Tonight’s FOMC presents additional major risk.

AUD/USD 1-3 month: The uncertainty generated by Brexit plus further RBA easing should be negative for the AUD during the months ahead. We target sub-0.72.

NZD/USD 1 day: In a more neutral state after yesterday’s sudden bounce, and likely to hold above 0.7000 ahead of this afternoon’s AU CPI data. Tonight’s FOMC presents additional major risk.

NZD/USD 1-3 month:  The uncertainty generated by Brexit plus further RBNZ easing should be negative for the NZD. We target 0.67.

AUD/NZD 1 day: Consolidating July’s gains in a 1.0600-1.0770 range, today’s AU CPI data posing major event risk.

AUD/NZD 1-3 month: We expect both the RBA and RBNZ to cut their policy rates in August, to 1.5% and 2.0% respectively.  Relative central bank paths are thus neutral for the cross. Multi-month, though, there is a case for higher, towards 1.0800, given it is currently well below fair value implied by interest rates, commodity prices and risk sentiment.

AU swap yields 1 day: The 2yr should open around 1.76% while the 10yr should open around 2.19%.

AU swap yields 1-3 month: If the RBA cuts to 1.5% as we expect, then the 2yr should eventually find a base around 1.7%. However the main risk is that markets expect a sub-1.5% cash rate.

NZ swap yields 1 day: NZ 2yr swap rates should open 1bp higher at 2.06% while the 10yr should open unchanged at 2.46%.

NZ swap yields 1-3 month: Slightly lower. The OCR should be cut to 2.0% in August, but the risks are it could fall further later on, which means the 2yr could test 2.00%."