NZD/AUD: Ultimately range bound, but too high right now - ANZ

Analysts at ANZ note that over recent weeks the NZD/AUD has strengthened, unwinding all of its post-RBNZ weakness.

Key Quotes

“Initially, the move lower looked to be positioning related, but more recently the AUD has been hit hard by increased political uncertainty surrounding the Liberal Party leadership (the subsequent appointment of Scott Morrison as PM did result in a AUD/USD relief rally, but only a modest one).”

“However, our fundamental views have not shifted. While Australian political uncertainty does have the potential to linger for a while, we don’t see wholesale changes in the policy agenda, and as a result, do not believe it justifies a sustained period of AUD underperformance against the NZD.” 

“On the NZ side, we still feel that risks to growth are skewed to the downside.”

“At current levels we believe the market is pricing in a mildly divergent economic story that does not exist. This cross remains above our short-term fair value estimate, but we think it can head towards this estimate (0.88) in time.”