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Thomson Reuters
Aug 09 - 02:36 PM
COMMENT - AUD/USD May Succumb To Kiwi Contagion
First appeared on eFXplus on Aug 09 - 12:20 PM

The dovish RBNZ gave AUD/USD an initial boost, spiking it through the daily cloud base and 55-DMA as AUD/NZD rallied, but markets are giving into suspicions that the RBA could eventually follow New Zealand's example. AUD/USD has erased all of its gains and the pair is down on the day.
The U.S. dollar's broad bid is one weight, but the RBNZ is also casting a long shadow.
The RBNZ lowered its forecast for the December 2019 OCR to 1.8 percent from 1.9 percent and pushed rate hike forecasts to late 2020.
In a Bloomberg article RBNZ Assistant Governor McDermott fanned dovish flames by noting chances of an interest cut have increased. Click here

Global trade tensions could begin hampering APAC economies and slower growth in China is likely to impact them for the worse.
Australia would be hard pressed to escape this fate.
A slower growth path could force the RBA to take on a dovish tone at some point, while also pulling back on rate hike expectations.
That would further undermine the allure of AUD/USD.
The pair's consolidation of long-term losses is likely to persist and should resolve with a break to new trend lows.

chart: Click here

Thomson Reuters IFR Markets


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