Citi summarizes its tactical bias on AUD and NZD.
"Bearish AUD (change), Bullish NZD: RBA 2022 hike pricing remains elevated in contrast to the dovish communication at the November meeting. We expect further reversal in front-end pricing and waning terms of trade tailwind to weigh on AUD. Elevated milk prices, rising risk premium of a 50bp hike at the November meeting, and improved domestic sentiment are likely to support NZD," Citi notes.
"We are short AUDNZD as i) a dovish November RBA meeting suggests that the RBA is much more likely to under-deliver vs market pricing than the RBNZ, ii) the stellar Q3 labor data in New Zealand raise the likelihood for a 50bp hike at the November RBNZ meeting, which is under-priced by markets, iii) our fair value model shows that AUDNZD is overvalued," Citi adds.