Synopsis:
ANZ remains cautious on AUD/USD and AUD/NZD, with next week’s Q4 GDP and retail sales data key for near-term direction. While Australia’s economy remains resilient, inflation surprises are the lowest in G10, and economic differentials with New Zealand are narrowing, reducing the case for further AUD/NZD upside.
Key Points:
1️⃣ RBA's Shallow Easing Cycle Limits AUD Downside 📉
- The steady 2.5% y/y CPI print supports the view that the RBA will only cut once more this year.
- Stronger consumer spending and labor market data are reinforcing the RBA’s cautious approach to rate cuts.
- February’s RBA meeting signaled that economic strength is preventing more aggressive easing.
2️⃣ AUD/NZD: Limited Upside as Economic Gaps Narrow ⚖️
- Australia’s resilience vs. New Zealand’s weakness is already priced in.
- Higher-frequency data in NZ indicate a budding recovery, as RBNZ rate cuts take effect.
- AUD/NZD is a crowded long trade, raising risks of a pullback.
- ANZ targets AUD/NZD at 1.08 by year-end.
3️⃣ AUD/USD: Tariff and Growth Concerns Weigh on AUD 🏷️
- Near-term tariff risks have faded, reducing FX volatility.
- Global growth concerns (weaker US data, trade uncertainty) remain a headwind.
- ANZ stays negative on AUD/USD for now.
Conclusion:
The RBA’s cautious easing cycle and economic resilience should limit AUD downside, but AUD/NZD may struggle to rise further as New Zealand’s economy catches up. Meanwhile, AUD/USD remains vulnerable to tariff risks and softer global growth trends.
