AUD/NZD: AUD to overtake NZD – TDS

Following the statement from the Reserve Bank of New Zealand, which left rates unchanged at 1%, analysts at TD Securities are expecting the Aussie to be a bigger beneficiary from a short-lived coronavirus impact than the kiwi.

Key quotes

“As expected, the RBNZ left the cash rate unchanged at 1.0%.”

“Naturally, the NZD rallied following the decision. We think there is still an uphill battle for NZD over the medium-term. Indeed, our long-term estimates suggest the NZD is the most expensive in the G10 (outside of the broad USD).” 

“If the impact of the viral outbreak is short-lived and risk/growth rebound, we rather think that the AUD will be a much bigger beneficiary where there are already medium-term tailwinds to boot already.” 

“We also note that collectively, our long-term fair value models suggest AUD remains at a discount. All of this has us inclined to look at AUD/NZD upside as the path of least resistance. As we noted last week, we await a dip to 1.0350 to consider a dip buying opportunity at this point in time as the pair has put in good work to carve out a trough in the 1.0250/1.0300 area already.”