NZD/AUD Outlook:
Bearish, as the rate is below its recent average and approaching recent lows.
Key drivers:
• Rate gap: The Reserve Bank of New Zealand is expected to cut interest rates, while the Reserve Bank of Australia has recently raised rates, widening the gap in monetary policy.
• Risk/commodities: High dairy prices have supported the NZD slightly, but volatility and global trade tensions pose risks to commodity performance.
• Macro factor: Sticky Australian inflation increases the likelihood of further rate hikes from the RBA, adding upside pressure on the AUD.
Range:
The NZD/AUD pair is likely to drift within its recent 3-month range.
What could change it:
• Upside risk: A surprising rebound in New Zealand's export performance could strengthen the NZD.
• Downside risk: Continued strengthening of the AUD due to more aggressive monetary policy could push the NZD/AUD rate lower.