NZD/AUD Outlook:
Bearish, as the rate is below its recent average and near recent lows.
Key drivers:
• Rate gap: The Reserve Bank of New Zealand is signaling potential interest rate cuts, while the Reserve Bank of Australia has just raised rates, widening the interest rate differential.
• Risk/commodities: The recent drop in global commodity prices has negatively impacted the New Zealand dollar, limiting its strength compared to the Australian dollar.
• Macro factor: Ongoing labour-market concerns in New Zealand are contributing to a lack of confidence in the NZD’s outlook.
Range:
The NZD/AUD rate is likely to hold close to current levels within its recent stable range, but may see downward pressure.
What could change it:
• Upside risk: A significant rebound in commodity prices could support the NZD's performance.
• Downside risk: Continued negative signals from New Zealand's labour market could further weaken the NZD against the AUD.