27 Sep 2013
Flash: AUD/NZD, parity anyone? - TD Securities
FXstreet.com (Barcelona) - In its weekly research note to clients, TDS Global Research Team argues on the divergent central bank bias in New Zealand vs Australia to still favour the NZD over the AUD.
Key Quotes
"RBNZ Governor Wheeler announced an aggressive tightening bias in his September 12 Policy Assessment via “OCR increases will likely be required next year. The extent and timing .. will depend largely on the degree to which the momentum in the housing market and construction sector spills over into broader demand and inflation pressures”. This is unambiguous."
"On September 3, in contrast, the RBA retreated to the sidelines with a neutral tone in the Board communiqué, we believe to allow the 7 September Federal election to hold centre stage, and let the prior –25bp cut in August to 2.5% sink in. With the election bringing a new political party with Prime Minister Abbott via a strong majority, as suggested by the exit polls, that is no longer an issue. Unfortunately for the RBA, mixed messages around US Federal Reserve forward guidance has pushed the AUD 4 cents higher to $US0.94 since the September Board meeting."
"We forecast the low for this cycle to be around 1.09 in the early months of 2014, as the RBNZ tightening cycle gets underway. But with a refreshed easing bias from the RBA to be revealed, possibly as soon as next week, combined with the hawkish forward guidance from the RBNZ, we cannot rule out the NZD trading even closer to the AUD in the coming months, given this cross rate has a history of overshooting. Parity anyone?"
Key Quotes
"RBNZ Governor Wheeler announced an aggressive tightening bias in his September 12 Policy Assessment via “OCR increases will likely be required next year. The extent and timing .. will depend largely on the degree to which the momentum in the housing market and construction sector spills over into broader demand and inflation pressures”. This is unambiguous."
"On September 3, in contrast, the RBA retreated to the sidelines with a neutral tone in the Board communiqué, we believe to allow the 7 September Federal election to hold centre stage, and let the prior –25bp cut in August to 2.5% sink in. With the election bringing a new political party with Prime Minister Abbott via a strong majority, as suggested by the exit polls, that is no longer an issue. Unfortunately for the RBA, mixed messages around US Federal Reserve forward guidance has pushed the AUD 4 cents higher to $US0.94 since the September Board meeting."
"We forecast the low for this cycle to be around 1.09 in the early months of 2014, as the RBNZ tightening cycle gets underway. But with a refreshed easing bias from the RBA to be revealed, possibly as soon as next week, combined with the hawkish forward guidance from the RBNZ, we cannot rule out the NZD trading even closer to the AUD in the coming months, given this cross rate has a history of overshooting. Parity anyone?"