NZD/USD: on way to 0.6500 on Brexit uncertainties? - Westpac

Analysts at Westpac offered outlooks for the kiwi and AUD/NZD cross.

Key Quotes:

"NZD/USD 1 day: The sharp reversal from just above 0.7300 argues for further slippage today, sub-0.72200. The strong US dollar is the main factor at play.

NZD/USD 1-3 month:  The uncertainty generated by Brexit plus further RBNZ easing should be negative for the NZD. We target 0.65.

AUD/NZD 1 day: Early signs momentum is basing but it needs to clear 1.0440 before a long-term bottom can be signalled.

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 1.0600, 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 1.78% while the 10yr should open below 2.11%.

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%.  

NZ swap yields 1 day: The 2yr should open 2bp higher at 2.24%, the 10yr up 3bp at 2.53%.

NZ swap yields 1-3 month: Slightly lower. The OCR should be cut to 2.0% low in August, which means the 2yr should reach 2.10% (a 2.0% OCR plus a 10bp bank bill premium)."