From RBS note via Forexlive:
AUD/NZD has made a new record low. After several tests of previous lows in recent years, ‘bottom-fisher’ demand is likely to be largely spent. The interest rate spread suggests still lower levels are possible. Relative fiscal conditions and political strengths support the NZD, while it is conceivable that rating agencies will threaten to down-grade Australia’s sovereign rating. Relative commodity price trends have moved in favour of the NZD since mid-2014, dairy prices have recovered 29% from their low in December, while steel prices in China have fallen sharply this year. We remain bearish AUD/NZD favouring a move to parity and possibly 0.95. However, factors that may interfere with this view are relative macro-prudential actions. Both Australia and New Zealand are assessing housing market and credit growth conditions in Q1. The RBNZ appears more willing to act decisively on macro-prudential measures than Australian regulators and this may delay a rate cut in Australia. A drought in New Zealand is developing and also bears watching. A rebound in energy prices could provide respite for the AUD, as would renewed confidence in Chinese construction and infrastructure spending.
Pursuing note!
