Synopsis:

Credit Agricole observes a surge in long AUD/NZD positions following the RBNZ's recent rate cut, with momentum driven by the RBA's hawkish stance and investor expectations.

Key Points:

1. RBNZ Rate Cut Impact:

   • The RBNZ's recent rate cut has prompted a renewed interest in long AUD/NZD trades, as investors capitalize on the divergence in monetary policy between New Zealand and Australia.

2. RBA's Hawkish Stance:

   • The RBA's pushback against immediate rate cut expectations has further fueled upward momentum in AUD/NZD. RBA Governor Michele Bullock emphasized that a rate hike was considered in August, while RBA Deputy Governor Andrew Hauser criticized market certainty about imminent rate cuts.

3. Data Dependence:

   • The continuation of AUD/NZD's upward momentum hinges on upcoming Australian labor market data. While recent indicators like the wage price index surprised slightly to the upside, the overall data have not decisively shifted monetary policy expectations. The unemployment rate will be a key focus for investors, with the RBA forecasting a gradual rise from 4.1% to 4.3% by year-end.

Conclusion:

Credit Agricole notes strong investor interest in long AUD/NZD positions, driven by the RBNZ's dovish rate cut and the RBA's data-dependent, hawkish stance. The outlook for the cross will be influenced by upcoming Australian labor market data, particularly the unemployment rate.