Long AUD/NZD (From 1-Nov to 6-Nov)
We were stopped out of our long AUD/NZD after the stronger than expected NZ labour data on Wednesday 6-Nov
Real-Time AmpGFX – Bought AUD/NZD (Thu 11/1/2018 11:28 PM MT)
Bought one unit AUD/NZD at 1.0834
AUD is benefiting from relatively strong commodity prices and new export volumes of natural gas.
This was born out in the trade data this week, which is opening up a significant performance gap with New Zealand.
The AUD/NZD rate spreads support the case for a rebound in AUD/NZD.
The market is pricing in an easing of US trade tensions with China, Chinese measures to shore up its stock market and boost to fiscal stimulus. This may tend to boost the AUD more than NZD.
Q3 Retail sales were weaker than expected in Australia, consistent with the slowing in the Australian housing market. Earlier in the week, Australian CPI was also lower than expected in Q3.
However, NZD economic reports are generally showing growth may have fallen below trend, whereas Australia is still showing stronger trends in business surveys and labour market indicators.
Looking ahead to the economic reports, we see the risk biased towards a softer than expected NZ labour market report next week, and no change in the RBNZ rates outlook, maintaining a neutral bias acknowledging a willingness to cut rates again.
The RBA is also likely to maintain its neutral policy outlook with an expectation that the next move it rates is more likely to be an increase. Two weeks ahead, leading indicators suggest that the Australian labour market will retain its recent strength. Ahead of that, there should be an increase in Q3 wages data as minimum wage increases and public sector agreements add to growth in Q3. This should be viewed as a sign that wage growth is recovering, consistent with a tightening labour market.
Long one unit of AUD/NZD at 1.0834; s/l 1.0773; t/p 1.1058 (Capital at Risk 0.57%)