The RBNZ’s strong easing bias, dissatisfaction with the level of the NZD, weaker inflation and more challenging outlook all make it a significantly more likely candidate to ease policy rates again than the RBA.
While the risk remains that the RBNZ will ease policy at least once in the short term, we remain convinced that the RBA will hold its nerve and not cut rates again this cycle.
This is despite the risks in Australia remaining to the downside, emanating particularly from the appreciating AUD/dovish US Federal Reserve. Domestically, we will continue to watch the unemployment rate to gauge the likelihood of further moves by the RBA.
On our outlook the AUD will continue to outperform the NZD.
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