ANZ: Long AUD/NZD as a medium-term trade for 2025
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.
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.
- ANZ expects the RBNZ to cut rates earlier and more aggressively than the RBA:
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.
- Australia’s GDP outlook appears more optimistic than New Zealand's:
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.
