The RBA’s attempt to talk down the currency has done little damage to the AUD. In fact, it spiked higher on the day of the RBA meeting, where the statement mentioned that “an appreciating exchange rate could complicate the adjustment underway in the economy.” The subsequent softness in the AUD in the following days was more related to commodity price weakness and increased market risk aversion.
We continue to think that RBA policy is unlikely to be a key driver of AUD weakness, but China growth risks, commodity prices and Fed policy are more likely to exert pressures on the AUDUSD over the medium-term.
This week, we look for employment gains of 15k in March, although the unemployment rate could reverse the decline in February (Thu; Barclays: 6%; last: 5.8%). We continue to expect the RBA to remain on hold throughout 2016, unless the economic outlook deteriorates notably.
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As such, despite the RBA’s slight uneasiness with the strong AUD, we continue to recommend staying long AUDNZD considering that the softening of consumer and business confidence in New Zealand suggests that the RBNZ is likely to be more uneasy about currency strength than the RBA.
Barclays is long AUD/NZD from 1.0921 targeting 1.1430.