AUD/NZD has been firm most of the NY session, pressing against the overnight highs of 1.1455/60 but is now giving up gains, dropping back to 1.1420. Traders here see the cross overvalued with the recent basis for long AUD/NZD recommendations based on expected revisions of the CPI weightings that should see inflation drop in NZ. However, the analysts are blatantly ignoring the fact that even with the expected decline, inflation is running well above the RBNZ comfort zone and the housing and labor markets are still seen underpinning price pressures in the economy.
Some pundits are now calling for an RBNZ rate hike this month, and this is being ignored in the price of the cross which still has NZD with a yield premium over AUD. Even more conservative analysts see a 50/50 chance of a NZ rate hike before the year end. This risk is seen pressuring the recent longs, risking a pullback to 1.1200 in coming sessions. NZD/USD is at 0.6594/99 currently, still meeting offers ahead of 0.6600 with more sellers tipped at 0.6620.
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