29 Apr 2014
Sell AUD/NZD targeting 1.0550 - HSBC
FXStreet (Bali) - The HSBC FX Strategy Team is recommending to sell AUD/NZD targeting 1.0550.
Key Quotes
"A few factors look likely to drive the AUD lower in the run-up to the RBA meeting on Tuesday 6 May, but we expect the NZD to drift sideways. As a result, we retain our recommendation to sell AUD-NZD targeting 1.0550."
While we expect some near-term weakness in the AUD, we think the NZD will track sideways against the USD. Additional upside for the currency will be constrained by the central bank’s recent efforts to talk it lower, noting that it “does not believe the current level of the exchange rate is sustainable” and reminding markets that a stronger currency would lead to “lower inflation pressure”."
"But in an environment of low volatility, the NZD’s attractive (and growing) carry appeal should prevent it from slipping. For the last year, AUD-NZD had faithfully followed expected rate differentials for December 2015, but now FX is higher at 1.0850 than the 1.0600 that rates would imply. We expect this gap to close via a lower AUD-NZD."
Key Quotes
"A few factors look likely to drive the AUD lower in the run-up to the RBA meeting on Tuesday 6 May, but we expect the NZD to drift sideways. As a result, we retain our recommendation to sell AUD-NZD targeting 1.0550."
While we expect some near-term weakness in the AUD, we think the NZD will track sideways against the USD. Additional upside for the currency will be constrained by the central bank’s recent efforts to talk it lower, noting that it “does not believe the current level of the exchange rate is sustainable” and reminding markets that a stronger currency would lead to “lower inflation pressure”."
"But in an environment of low volatility, the NZD’s attractive (and growing) carry appeal should prevent it from slipping. For the last year, AUD-NZD had faithfully followed expected rate differentials for December 2015, but now FX is higher at 1.0850 than the 1.0600 that rates would imply. We expect this gap to close via a lower AUD-NZD."