AUD/NZD: expect a retest of the 1.08 handle? - Westpac

Analysts at Westpac offered their outlook for the antipodean cross and rates.

Key Quotes:

"AUD/NZD 1 day: The 1.0800 area is capping for now, but retests are expected during the day ahead given the risk-positive tone offshore.

AUD/NZD 1-3 month: Higher to 1.10. The cross remains well below fair value estimates implied by interest rates, commodity prices and risk sentiment, although it is closing the gap (6 Mar).

AU swap yields 1 day: The 3yr should open at around 1.95%, the 10yr around 2.83%.

AU swap yields 1-3 month: Our RBA outlook (on hold for some time) is anchoring front end valuations. We expect 3yr swap rates to remain in a 1.9% to 2.3% range, with core inflation still below 2%. (26 Apr)

NZ swap yields 1 day: NZ 2yr swap rates should open 1bp higher at 2.23%, the 10yr up 2bp at 3.31%.

NZ swap yields 1-3 month: The RBNZ has signalled the next cycle – a tightening one – will not start until late 2019. That will anchor the short end, although markets will not abandon their expectations for tightening as early as mid-2018 which means occasional spikes in the 2yr will be likely. The long end will continue to follow mainly US yields, which we expect to rise. That means the curve steepening trend should continue. (15 May)"