Its the RBA (0.75% in cuts to come) vs. the RBNZ (0.5% to come) - AUD & AUD/NZD trades
Those are the forecasts from TD for the Reserve Bank of Australia and Reserve Bank of New Zealand
On the RBA, TD:
- say they have pencilled in cuts for July and November 2019 and May 2020
- Making inroads into cutting spare capacity is the major driver for RBA cuts
- We think the AUD has bottomed and a broadly weaker USD profile reinforces a push back above 0.70 in H2
- Risk is: The RBA cuts more aggressively than our 2019 forecast."
On the RBNZ:
- Deteriorating fundamentals
- firmer NZD
are catalysts for RBNZ cuts.
Trade:
- we like buying AUDNZD dips towards 1.04
- Rallies are likely capped in the short-term around the 1.07 level
- Risk: The increase in capital requirements drives the RBNZ to cut in 2020 to 0.75%
- Where we could be wrong: The likelihood of a truce between the US and China would remove pressure on Central Banks to ease. Any signs that spare capacity is being absorbed faster than anticipated and/or domestic consumption and investment picks up would provide the RBA and RBNZ time and hold off from easing.
Reprinted from Forexlive，the copyright all reserved by the original author.
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