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AUD/NZD – The Battle Begins
The AUD/NZD pair finds itself in a stalemate both fundamentally and technically. Both of the antipodeans represent the last of the carry amongst the major pairs, but they have both lost a lot of their luster as the commodity rout has taken a toll on both economies.
However, New Zealand could be weathering the storm better than Australia because the country’s primary source of exports is in consumables rather than iron ore. Tomorrow is the RBNZ meeting with most market participants anticipating a rate cut, but the most recent data from New Zealand has been surprisingly strong. Last night’s Truckometer readings and manufacturing activity led some analysts to revise GDP growth from 0.5% to 0.8%.
Therefore there is a small, but very real chance that the RBNZ may choose to hold rates steady, which would provide the kiwi with an even bigger lift as it will remain the predominant carry trade in the advanced industrialized world and offer a premium yield to the Aussie. If RBNZ does hold steady the surprise could push AUD/NZD all the way to a test of lows at 1.0500 while a rate cut may only have a mild impact to the upside as most of it is factored in.