- The main impact from the RBNZ’s Q2 switch from a steady outlook to a monetary easing phase is probably already in the AUD/NZD price, following a 13% rally since Easter.
- The RBA is likely to remain on hold this year (albeit with easing risk), while the RBNZ should cut rates again at the next 2 meetings and retain an easing bias into Q4.
- Monetary policy divergence, backed by relative growth risks (e.g. dairy prices weighing in NZ) thus should limit dips on AUD/NZD multi-month. The break of 1.1300 resistance opens up a run at 1.1580 multi-week. But this would arguably be overshooting, with fair value nearer 1.1250 and iron ore prices likely to fall in Q3.
- A potential bout of sustained risk aversion stemming from Greece would hurt both AUD and NZD against USD and play neutral for the cross.
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