Dare RBNZ Stand Alone?
Being short AUDNZD is one of our long-held trade recommendations. Despite seemingly stretched valuations, relevant data releases so far this week only reinforce our view that this trade has further to run. Data out of China looks close to peaking, while New Zealand’s house prices and the upcoming CPI print also point to a need for vigilance on the part of the RBNZ (though the headline prices are still well below target). Finally, the risks to the AUD from the RBA remain asymmetric, even after October meeting minutes: hard to obtain a less dovish outlook henceforth, while the risks from currency strength may prove more pronounced as the cycle turns. Yet, the market still appears reluctant to have any long-NZD position on: how could a central bank that not long ago admitted to intervention allow itself to be an isolated hiker with global risks so pronounced?
Read the full report: UBS