AUD/NZD: plenty of event risk on the day - ANZ

Analysts at Westpac offered an outlook for the antipodean cross and rates.

Key Quotes:

"AUD/NZD 1 day: Stalled between 1.0450 and 1.0550 for now, but plenty of event risk on the day.

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 2.10%, the 10yr around 2.91%.

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 up 1bp at 2.38%, the 10yr up 2bp at 3.44%. NZ yields have risen faster than US yields during the past two weeks.

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 by year end. (30 Jun)"