AUDNZD consolidating above 1.0300, Aussie against US dollar nudged slightly lower, from 0.6760 to 0.6737 – the lowest since October. AUDNZD rebounded to 1.0351.
AUDNZD medium term perspective: The 5c fall since early Nov could stretch to the 1.0300 area, with NZ’s better fundamental backdrop (including yield spreads and commodity prices) and expectations of RBA QE weighing. Fair value remains much higher but will require global tensions (trade and geopolitical) to subside.
We activate strategic AUD shorts via AUDCHF put spread financed through a AUDNZD put spread.
This part-hedge to pro-growth trades also expresses AUD broad underperformance as the RBA eventually heads towards delivering QE.
A better than expected labor market report this week does little to change underlying views and we continue to expect the next RBA move of a Feb rate cut and did little to AUD’s ongoing grind lower, as the U-rate remains meaningfully above NAIRU (4.5% vs 5.1% current), and as this week’s survey data otherwise highlighted ongoing sluggish momentum in the economy.
Trade tips:
Add longs in a 6M AUDCHF 0.66 / 0.64 put spread, short a 6M AUDNZD 1.03 put. Paid 38bp AUD at the end of November. Marked at 10 bp. Courtesy: JPM & Westpac


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