Market outlook for antipodeans - Westpac

Analysts at Westpac offered their market outlooks for the antipodeans.

Key Quotes:

"AUD/USD 1 day:  Yesterday’s bearish reversal halts a two-week run, but risk sentiment and commodity prices (iron ore up 2.7% yesterday to a two-year high) are strong.   

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: A sharp bearish reversal yesterday, plus the RBNZ’s likely rate cut this morning,\ take the gloss off the NZD. We target 0.7250.

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: This corrective decline since mid-Oct has so far retraced 77% of the Sep/Oct rally and is now ready to launch a fresh rally. We target 1.0550 during the week ahead.

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 1.83% and 2.62%, respectively.

AU swap yields 1-3 month: The 2yr base at 1.60% should hold during the next few months (barring an offshore-sourced shock), with the the RBA expected to sit tight at 1.5% for some time. (7 Nov)

NZ swap yields 1 day: NZ 2yr swap rates should open higher at 2.27%, the 10yr at 3.07%. The RBNZ MPS at 9am could change all that.

NZ swap yields 1-3 month: Markets are now assuming the widely expected rate cut on 10 Nov will be the last in this cycle (barring an offshore-sourced shock). Thus, the 2yr will probably struggle to fall below 2.00%, with a range of 2.15%-2.35% more likely during the next few months. (7 Nov)"