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May 29 - 02:55 PM

Goldman Sachs: Near-term Triggers for AUD/NZD

By eFXdata  —  May 29 - 01:30 PM

Synopsis:

Goldman Sachs examines the dynamics influencing the Australian Dollar (AUD) and New Zealand Dollar (NZD), identifying potential triggers that could lead to a sustained downward movement in the AUD/NZD exchange rate. The analysis focuses on the role of commodity prices, especially dairy, and the divergent monetary policy paths of Australia and New Zealand.

Key Points:

  • NZD Performance: NZD has outperformed AUD recently, driven by a less direct correlation with China's economic expectations and a significant correlation with dairy prices, New Zealand's major export.
  • Commodity Price Support: The increase in dairy prices, with a notable rise of nearly 10% this month, has bolstered the NZD.
  • Policy Divergence: The Reserve Bank of New Zealand's (RBNZ) unexpectedly hawkish stance in its May meeting has been a key factor in the recent AUD/NZD divergence.
  • Future Triggers: Key upcoming events that could influence AUD/NZD include the Reserve Bank of Australia's (RBA) meeting on June 18 and New Zealand's Q2 inflation data on July 17. Additionally, New Zealand's government budget announcement on May 30, which may include significant stimulus measures, could further impact rate cut expectations and AUD/NZD dynamics.

Conclusion:

While recent trends and economic indicators have supported NZD strength relative to AUD, Goldman Sachs suggests that a significant and sustained move lower in AUD/NZD would likely require greater policy divergence than currently anticipated. Near-term events, such as the upcoming RBA meeting and New Zealand's budget, will be critical in shaping the exchange rate's direction.

Source:
Goldman Sachs Research/Market Commentary

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