AUDNZD’s upward push is losing momentum

19 May, 2015

It has been a busy day in Asia, with the release of the RBA minutes from its policy meeting earlier this month and the RBNZ’s Q2 inflation expectations. The former hurt the aussie, while the latter breathed life into the struggling kiwi, sending AUDNZD to an important support zone around the base of its medium-term upward channel.

The RBA used its meeting minutes to reintroduce an implicit easing bias, after removing it entirely from Governor Stevens’ statement following the bank’s policy meeting earlier this month. At the meeting the RBA cut the official cash rate to a record low 2.00% from 2.25%, citing an accommodative inflation outlook. The minutes reveal that the board weighed the possibility of waiting until June to cut interest rates, before ultimately deciding that sooner was better. However, we don’t see an explicit easing bias in the minutes and we consider the bank firmly in wait-and-see mode. In saying that, we still think the RBA will be forced to lower the official cash rate even further later this year.

In NZ, the RBNZ released a fresh set of inflation forecasts, with the bank revising up its two-year forecast to 1.85% from 1.80% and its one-year forecast to 1.32% from 1.11% last quarter. This helped to ease some pressure that has been building on the kiwi in the face of increased expectations for looser monetary policy, especially after both the RBNZ and the government announced separate measures to ease house price inflation, thereby freeing up the central bank to loosen monetary policy. These latest predictions for consumer prices decrease the likelihood of further easing in the near-term and are a little more optimistic than the market was expecting, thus they may support the kiwi.

What does this all mean for AUDNZD?

The recent rally in AUDNZD has been the result of investors tapering their expectations for further easing in Australia while entertaining the idea of lower interest rates across the Tasman. Today’s developments cast some doubt over these assumptions, hence the unwinding of AUDNZD longs. Yet, we can still see a need for looser monetary policy in NZ, especially if the government succeeds in suppressing housing demand in Auckland. In saying that, we also see a need for lower monetary policy in Australia, although the effect of lower interest rates at this end of the policy spectrum is greatly reduced. Overall, it may be time for a period of consolidation in AUDNZD.


Source link  
Gold surges to major $1250 resistance as uncertainty prevails

Gold surged Thursday on a breakout of its previous consolidation to hit and slightly exceed major technical resistance at $1250, a level not seen since early November...

Gold remains vulnerable amid hawkish Fed, strong dollar, equity highs

Gold has climbed sharply since the beginning of the year as the US dollar has pulled back from its late-2016 highs and the US Federal Reserve has exercised characteristic restraint in raising interest rates further after the last rate hike in December...

Gold well-supported on safe-haven flows, lagging dollar

Increasing political and economic uncertainties under the new Trump Administration, coupled with a sliding US dollar since the beginning of the year, have led to a sharp rise in gold prices for more than a month...


Gold pressured as dollar and equities remain supported

As the US dollar found some new life on Thursday and US equity markets hovered right around their new all-time highs, gold extended its recent pullback well below the $1200 handle. Since late December, the price of gold had been in a sharp relief rally from its 10-month lows around $1125 support...

Crude oil maintains bullish trend

Oil prices were initially weaker at the start of the new week, but they have now recovered to trade almost flat at the time of this writing. At the weekend, the OPEC and some producers outside of the group met to discuss the progress of their oil production deal...

Trump press conference fails to deter equity bulls

President-Elect Donald Trump spoke on Wednesday morning at his first formal press conference since the November elections, and the markets were all ears. Trump covered a lot of ground with multiple topics that included...


Gold ripe for potential relief rally

The charts tell a clear story of the unrelenting plunge in gold prices since early November. This steep dive has been the result of several related factors, all of which have the potential to extend well into the new year. These largely Trump-driven factors include...

Could EUR/USD finally break 1.05 on this FOMC day?

The market is demanding a rate rise and the Fed better deliver it today, for if it doesn’t the bank’s credibly will be severely damaged. There is really no excuse not to do so. Economic data has been improving, financial markets are calm...

Mixed Jobs Report Keeps High Fed Expectations Intact

As we noted the day before Friday’s US jobs report, only a significantly worse-than-expected reading for November would have likely made the Federal Reserve’s next interest rate decision more difficult...

  


Share: