According to Sean Callow at Westpac Global Strategy Group, considering the fiar value, AUD/NZD has plenty of room to rally, but they find it hard to be too bullish above 1.14”.
Key Quotes:
“The iron ore price surge was already supporting an upswing in AUD/NZD before the RBNZ’s rate cut fuelled sharp gains to 6 month highs.”
“Our estimates of AUD/NZD fair value continue to outpace the spot rally, so there is plenty of room for further gains, at least to above 1.14.”
“However, we find it hard to be too bullish much beyond 1.14, with markets now more than fully priced for the final (?) cycle RBNZ rate cut we have long expected and with risks on the prices of Australia’s key commodities tilted clearly lower multi-month. Moreover, markets continue to price in the risk of further RBA easing, with no sign that China’s demand for industrial commodities has been the driver of the recent rally.”
“AUD/NZD is no longer so blatantly undershooting but over the next year or so is still likely to remain well below the average of the past 31 years.”
(Market News Provided by FXstreet)