AUD/NZD to nosedive towards 1.00 on substantial RBA and RBNZ divergence – Rabobank

The Reserve bank of Australia (RBA) is still seen as dovish while the Reserve Bank of New Zealand (RBNZ) has jumped on the hawkish camp. Subsequently, Jane Foley, Senior FX Strategist at Rabobank, expects the AUD/NZD to edge lower towards parity.

The RBA is still broadly dovish while the RBNZ is not

“This week iron ore futures pushed towards a four month low. This factor along with further covid related lockdowns have increased the bearish signals for the AUD.”

“Depending on the outcome of next week’s RBNZ meeting, there is scope for AUD/NZD to drop further towards the 1.00 level on a 3 to 6 month view.”

“Even with tapering after November, RBA remains accommodative with no rate rise potentially until 2024. By contrast the RBNZ could be poised to hike rates as soon as next week.”

“PM Ardern has announced that borders could reopen next year. A reduction in border restrictions could further boost the country’s economic outlook into 2022. 

“Although the December 2020 low in the 1.04 area is likely to offer strong support we expect the downtrend in AUD/NZD has further to run.”