NZD/AUD Outlook:
The NZD/AUD exchange rate is likely to decrease. Currently, it is trading significantly below its recent average and near recent lows, primarily pressured by New Zealand's slow economic outlook.
Key drivers:
• Rate gap: The Reserve Bank of New Zealand is expected to maintain lower interest rates for an extended period, in contrast to Australia, which has recently increased rates.
• Risk/commodities: Ongoing volatility and uncertainty in global commodity prices are weighing on the NZD, affecting its value against the more resilient AUD.
• One macro factor: A decline in dairy prices is negatively impacting New Zealand's export revenue, contributing to the NZD's depreciation.
Range:
The NZD/AUD is expected to hold near recent lows within the current trading range as it faces downward pressure.
What could change it:
• Upside risk: An unexpected recovery in New Zealand business confidence could support the NZD.
• Downside risk: Continued geopolitical uncertainty may keep investor risk appetite low, further weakening the NZD against the AUD.
