Credit Agricole CIB Research maintains a short AUD/NZD position in spot targeting a move towards 1.16.

"The US and Iran grinding towards a deal to re-open the Strait of Hormuz is also weighing on oil prices and unwinding some of the terms of trade shift in favour of the AUD over the NZD. Importantly, even if a US-Iran accord is reached, there is a fair amount of inflation baked into the Australian and NZ economies, which both central banks will have to respond to. But the RBA is ahead of the curve, having raised rates three times already, and the RBNZ must play some catch up.

"The hawkish pivot by the RBNZ combined with softer Australian inflation is eroding the RBA-RBNZ rate divergence. Even today, NZ data pointed to bounces in business and consumer confidence in May, reducing one of the key reasons cited by internal RBNZ MPC members for resisting a rate hike this week while external members voted for a hike," CACIB notes.

"We continue to think there will be a grind lower in the Australia-NZ short-term rates differential back to its over 30Y average, bringing AUD/NZD likewise back towards its 30Y average of 1.16. The relative shift in the terms of trade advantage between Australia and NZ will also be a factor driving the exchange rate lower. We remain short AUD/NZD," CACIB adds.