Outlook for the antipodean cross and rates - Westpac

Analysts at Westpac offered an outlook for the antipodean cross and rates.

Key Quotes:

"AUD/NZD: The next major target 1.0240 (Sep low) for the weeks ahead.

AUD/NZD 1-3 month: Higher to the 1.0650-1.0770 area, mainly for valuation reasons. The cross remains well below fair value estimates implied by interest rates, commodity prices, and risk sentiment. (11 Jan)

AU swap yields 1 day: The 3yr and 10yr should open around 2.04% and 2.94%, respectively.

AU swap yields 1-3 month: The 3yr has probably based at 1.60%, the RBA expected to sit tight at a 1.5% cash rate for some time. (7 Nov)

NZ swap yields 1 day: NZ 2yr swap rates should open down 1bp at 2.44%, the 10yr down 2bp at 3.57%.

NZ swap yields 1-3 month: The RBNZ ended its easing cycle on 10 Nov and will remain on hold for a long time. That will anchor the short end somewhat (although the 2yr-OCR spread – one measure of stretchedness – could rise further given historical precedents) with the long end free to follow offshore yields. The curve steepening trend should continue."