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22 Nov 2013
Flash: AUD/NZD ripe for another leg lower - RBS
FXstreet.com (Barcelona) - The story for NZD is currently much better than for AUD, says Greg Gibbs, FX Strategist at RBS, adding that AUD/NZD cross (as we are seeing) is poised for another leg lower.
Key Quotes
"AUD is more exposed to the restructuring in the Chinese economy away from fixed asset investment to consumption. NZD is more exposed to rising Asian demand for protein. Did anyone mention higher demand from milk after China just jettisoned its one child policy? Australian is on the downside of a resources investment boom cycle, New Zealand is on the upside of a construction boom cycle. New Zealand is closer to hiking rates, its output gap is closed, unemployment is falling, and inflation is rising. Australian unemployment has been rising, wages falling and it may need a lower exchange rate to reinvigorate its non-resources sector."
"Furthermore, the falling JPY may well drag out more AUD/JPY selling. This was a factor early in the year, and again it appears that AU/USD tends to fall more easily when USD/JPY is rising."
Key Quotes
"AUD is more exposed to the restructuring in the Chinese economy away from fixed asset investment to consumption. NZD is more exposed to rising Asian demand for protein. Did anyone mention higher demand from milk after China just jettisoned its one child policy? Australian is on the downside of a resources investment boom cycle, New Zealand is on the upside of a construction boom cycle. New Zealand is closer to hiking rates, its output gap is closed, unemployment is falling, and inflation is rising. Australian unemployment has been rising, wages falling and it may need a lower exchange rate to reinvigorate its non-resources sector."
"Furthermore, the falling JPY may well drag out more AUD/JPY selling. This was a factor early in the year, and again it appears that AU/USD tends to fall more easily when USD/JPY is rising."