Currently the AUDNZD is trading around 1.0802 levels. We believe the pair is over sold as Aussie has been over sold on commodity concerns & NZD is over bought due to global DXY weakness. In terms of macro-outlooks, RBA (Reserve Bank of Australia) is unlikely to cut rates in CY24 as our view because of elevated inflation. Markets are still pricing in 88% chance of the 1st rate cut in Australian rates by end CY24 which we feel is unlikely. On the other hand RBNZ we believe might cut more than what is markets are pricing in (100 bps against market pricing of 75 bps currently) due to falling inflation as well deteriorating macros. Hence, we see long AUD as the perfect hedge for short NZD due to their different interest rate projections by end CY24 as well as near term macro-outlook.
