AUD/NZD's outlook? - Westpac

Analysts at Westpac gave their outlook for AUD/NZD and rates.

Key Quotes:

"1 day: The multi-month decline continues, falling iron ore prices one cause. Targets the mid-1.03’s next, although the decline is starting to look stretched.

AUD/NZD 1-3 month: Higher towards 1.09. The cross remains below fair value estimates implied by interest rates, commodity prices and risk sentiment, although it is closing the gap. There’s potential for a rebound in iron ore prices this year, given high steel prices (24 May).

AU swap yields 1 day: The 3yr should open around 1.84%, the 10yr around 2.64%.

AU swap yields 1-3 month: Our RBA outlook (on hold for some time) is anchoring front end valuations. We expect 3yr swap rates to remain in a 1.8% to 2.3% range, with core inflation still below 2%. (28 May)

NZ swap yields 1 day: NZ 2yr swap rates should open down 1bp at 2.20%, the 10yr down 4bp at 3.16%.

NZ swap yields 1-3 month: The RBNZ has signalled the next cycle – a tightening one – will not start until the end of 2019. That will anchor the short end, although markets will not abandon their expectations for tightening as early as mid-2018 which means occasional spikes in the 2yr will be likely. A 2yr swap range of 2.10%-2.60% is expected. The long end will continue to follow US yields, which we expect to rise. That means the curve steepening trend should continue. (15 May)"