AUD/NZD Outlook:
Likely to increase, as the rate is significantly above its recent average and nearing recent highs.
Key drivers:
- Rate gap: The Reserve Bank of Australia has raised interest rates recently, which strengthens the AUD compared to the New Zealand dollar, where the Reserve Bank of New Zealand is considering cuts.
- Risk/commodities: The ongoing strength in commodity prices, particularly in iron ore and coal exports, is enhancing demand for the AUD.
- One macro factor: Recent data showing a jump in Australia’s inflation has led to heightened expectations of further monetary tightening by the RBA.
Range:
The AUD/NZD is likely to test recent highs, given its strong position above the 3-month average.
What could change it:
- Upside risk: Stronger-than-expected employment data in Australia could further support AUD values.
- Downside risk: A significant drop in global commodity prices could weaken the AUD against the NZD.