ANZ: Long AUD/NZD as a medium-term trade for 2025

December 05, 2024 at 07:54PM
ANZ recommends going long AUD/NZD in early 2025, anticipating AUD outperformance driven by diverging monetary policies, growth dynamics, and New Zealand’s diminishing carry advantage.

Key Points:

Year-End Weakness in AUD/NZD:

Seasonal factors and risk sentiment tend to drive AUD/NZD lower into year-end.

Strong NZD demand from seasonal exporter flows in November and December typically supports the NZD.

Medium-Term Trade Opportunity:

Current levels around 1.08 present an opportunity to establish long positions in AUD/NZD.

Target range: 1.10 and above in 2025.

Monetary Policy Divergence:

ANZ expects the RBNZ to cut rates earlier and more aggressively than the RBA:

RBNZ: 50bp cut expected in February 2025, with a total rate of 3.4% by end-2025.

RBA: Rate cuts to begin in May 2025, with a total of only 50bp, leaving the policy rate at 3.8% by end-2025.

Relative Economic Growth:

Australia’s GDP outlook appears more optimistic than New Zealand’s:

RBA forecasts moderate growth, while RBNZ anticipates a Q3 contraction of -0.2% q/q before mild recovery.

Australia’s smaller current account deficit also supports the AUD.

Conclusion:

While seasonal factors and risk sentiment may temporarily weaken AUD/NZD into year-end, ANZ sees this as an opportunity to build long positions around 1.08, targeting 1.10 and above in 2025. Diverging monetary policy and stronger Australian growth dynamics provide a robust foundation for AUD outperformance.

For bank trade ideas, check out eFX Plus. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. Get it here.

This article was written by Adam Button at www.forexlive.com.