Synopsis:

Bank of America outlines a nuanced view on CAD, AUD, and NZD, with varying short- and medium-term biases shaped by trade tensions, domestic policy responses, and positioning.

Key Points:

• CAD: Mixed Bias

  • Short-term bearish due to lingering trade policy uncertainty and lack of confirmed capital rotation from the U.S.

  • Medium-term constructive as large fiscal stimulus is expected and pension funds may eventually repatriate funds.

• AUD: Bullish vs USD, but Soft Elsewhere

  • Supported by US-China tariff de-escalation and fiscal tailwinds.

  • Underperforms against stronger G10 crosses due to China growth concerns and a cautious RBA stance.

• NZD: Neutral vs USD, Bearish on Crosses

  • Inflation risks lean to the downside, with softer import prices and growth.

  • High current account deficit and risk-off vulnerability are key negatives.

  • Positioning now cleaner after a short squeeze.

Conclusion:

BofA sees CAD and AUD gaining medium-term support from domestic policy and trade détente, but NZD remains structurally weaker, especially against crosses, due to macro vulnerabilities and limited domestic policy levers.