Outlook for the antipodeans and rates - Westpac

Analysts at Westpac offered their outlooks for the antipodeans and rates.

Key Quotes:

"AUD/USD 1 day:  Momentum has flipped to negative, targeting 0.7510 next (late Jan minor low). The strong US dollar and AUD’s high-beta status are the main factors.

AUD/USD 1-3 month: Lower to 0.7400. The US dollar’s impressive post-election rally may have paused, but still has potential to rise further during the months ahead. The Fed’s assertive tightening bias plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar. Against that coal and iron ore are likely to sustain a good portion of their dramatic rises, and economic data for Q4 and Q1 should improve, but these forces are subservient to the US dollar’s trend. Australia’s AAA rating will remain an issue into the May budget. (23 Dec)

NZD/USD 1 day: Closing in on our medium-term target of 0.7000. The strong US dollar and NZD’s high-beta status are the main factors.

NZD/USD 1-3 month:  The Fed’s tightening cycle plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar, pushing NZD/USD down to 0.7000 or lower. Granted, the NZ economy is strong and dairy prices have risen, but these forces are subservient to the US dollar’s trend. (21 Feb).

AUD/NZD 1 day: Once again the 1.0765 area repelled. It has been tested, unsuccessfully, six times during the past year. If it can’t manage it over the next day or two, a correction down to the 1.0600 area will probably ensue.

AUD/NZD 1-3 month: Higher to the 1.0770 area at least. The cross remains well below fair value estimates implied by interest rates, commodity prices and risk sentiment. (17 Feb)

AU swap yields 1 day: The 3yr and 10yr should open around 2.15% and 3.07%, respectively.

AU swap yields 1-3 month: The 3yr has probably based at 1.60%, the RBA expected to sit tight at a 1.5% cash rate for some time. (7 Nov)

NZ swap yields 1 day: NZ 2yr swap rates should open up 1bp at 2.35%, the 10yr up 2bp at 3.56%.

NZ swap yields 1-3 month: The RBNZ said it has ended its easing cycle and will remain on hold until 2020. That will anchor the short end, although markets will not abandon their expectations for earlier tightening which means occasional spikes in the 2yr will be likely. The long end will continue to follow mainly US yields, which we expect to rise. That means the curve steepening trend should continue. (17 Feb)."