TD Research discusses AUD/NZD and sees a scope for upside, noticing that the RBA-RBNZ policy divergence looks discounted in the cross.
"AUDNZD continues to be a one way bet with the cross registering fresh lows sub-1.03 off the back of AU/NZ data surprises. We think the cross is nearing pricing in peak macro and policy divergence. That said, topside may still be premature until the RBNZ commences tightening this fall and settles the 25bp vs 50bp debate. Historically, the latter is a rare occurrence," TD notes.
"We think patience will be needed before a topside move can be realized in AUDNZD. As we note in our global FX monthly, HFFV strategies have been rewarded in our framework, and we track only a modest discount on our cross-asset FV gauge at the moment. There are some drags in AUD that limit a topside move in the cross for now, but we note some appreciable offsets," TD adds.