Antipodeans: Consolidating upward trend – ING

The Australian and New Zealand dollars are consolidating recent gains as US-China trade tensions have abated, while the USD failed to regain much ground, ING’s FX analyst Chris Turner notes.

Targets for AUD/USD and NZD/USD are 0.66 and 0.61 respectively

“Pitching a big rally in AUD and NZD has been harder compared to the outperforming European currencies, which are incidentally benefiting from stronger repatriation flow effects. However, reduced external economic risks related to China can allow AUD and NZD to enjoy some outperformance relative to peers with similarly high beta to risk sentiment in the coming weeks.”

“The NZD remains a more attractive option in our view as the Reserve Bank of New Zealand has signalled more cautiousness in easing further, while the Reserve Bank of Australia’s dovish tilt suggests more room for cuts. We expect only one additional cut in New Zealand this year as services CPI may prove too slow to decelerate, while the RBA may deliver two if not three more.”

“The erosion of AUD’s rate advantage relative to NZD means periods of calm in risk assets can favour NZD more than AUD for the remainder of the year. For now, we stick with our short-term targets of 0.66 in AUD/USD and 0.61 in NZD/USD.”