Listen to the latest market mood for the AUDNZD pair.

Weak AUD, Strong NZD

Strong CPI data out of New Zealand last night has helped the narrative for further NZD strength. New Zealand has been very good at limiting COVID-19 cases and Governor Orr has walked back markets from expecting negative interest rates. Kiwi Bank is the latest investment bank to think the RBNZ will no longer use negative interest rates. They join Westpac and ANZ.

On the strong CPI print New Zealand 10 year bond yields shot higher by 9bps. The bond yield spread moves higher on expectations of rising interest rates. Furthermore the bond yield spread between Australia and New Zealand has decreased indicating that AUDNZD sellers are ahead. There could be some strong AUDNZD selling ahead if this continues next week.

Therefore expect AUDNZD sellers at market and pullbacks.

Trade Risks:

  • The main risk to this trade is from a break out of COVID-19 in New Zealand.
  • Another risk is any comments from the RBNZ about wanting to use negative rates.
  • If the RBNZ talk about tapering bond purchases expect more selling of AUDNZD.