NZD/AUD: A deserved fall on fundamentals – BNZ

Jason Wong, Senior Market Strategist at BNZ, suggests that NZD/AUD has fallen alongside their short term model estimate, given the recent strong outperformance of Australian commodity prices (metals surging ahead) and the toning down of NZ rate hike expectations.

Key Quotes

"This fundamental shift needs to be respected, and our NZD/AUD projections have been downgraded accordingly alongside a material upgrade to NAB's AUD forecasts.  Our short term FV model estimate, which can get kicked around by commodity prices, has fallen to 0.9170."

"We now see, broadly speaking, a 0.91-0.95 range for the cross through to the end of next year, with the higher end more likely prevailing later in the period.  The near-term threat is a breach of 0.91 if metal prices continue to rally, alongside a possible kneejerk reaction to any NZ political uncertainty."