Synopsis:

ANZ presents a nuanced perspective on the Australian Dollar, expressing a cautious stance on AUD/USD due to stronger USD forecasts and mixed domestic signals, while forecasting strength in AUD/NZD based on favorable comparative economic fundamentals.

Key Points:

• AUD/USD Caution: ANZ anticipates a stronger USD in the near term, coupled with ambiguous signals from Australia's economic data, leading to a cautious outlook for AUD/USD.
• AUD/NZD Optimism: The cross reached a year-to-date high on May 2, 2023, and is expected to find support at these levels. Predictions of relative economic strength in Australia compared to New Zealand bolster this outlook.
• Year-End Targets: ANZ projects AUD/NZD to hit 1.11 by the end of the year, driven by a forecasted 5% appreciation of AUD/USD and a more modest 3% increase in NZD/USD.

Conclusion:

While the broader strength of the USD may dampen prospects for AUD/USD, the comparative economic robustness of Australia vis-à-vis New Zealand offers a bullish case for AUD/NZD, making it a potentially favorable position through the end of the year.