Synopsis:

Credit Agricole elaborates on their optimistic outlook for the AUD/NZD currency pair, amidst a backdrop of external challenges influencing the Australian dollar, such as rising U.S. Treasury yields, a strengthening USD, and weakening iron ore prices. The bank holds a long position in AUD/NZD, targeting a movement towards 1.12, citing various factors that favor the Australian currency over the New Zealand dollar.

Key Points:

• External Factors Impacting AUD: Higher U.S. Treasury yields, a robust USD, and declining iron ore prices are identified as significant external pressures on the Australian dollar.

• Optimistic AUD/NZD Outlook: Despite the challenges facing the AUD, Credit Agricole remains bullish on AUD/NZD, leveraging a positive view of the Australian economy through this currency pair and targeting a move towards 1.12.

• Influences on AUD/NZD: The firm notes declining dairy prices, which counterbalance the effects of falling iron ore prices on the AUD/NZD cross. Additionally, deteriorating business confidence and activity in New Zealand, alongside comments from RBNZ Governor Adrian Orr hinting at a return to "normalized rates," have negatively impacted the NZD, further supporting the bullish AUD/NZD position.

Conclusion:

Credit Agricole reaffirms its bullish outlook on the AUD/NZD pair, despite external pressures challenging the AUD. The bank's long position is underpinned by various factors, including relative commodity price movements and central bank commentary, which collectively support a forecasted rise in the currency pair towards 1.12. This stance offers an insightful perspective on leveraging cross-currency pairs to navigate and benefit from differing economic and market dynamics between Australia and New Zealand.