Credit Agricole discusses the impact of the RBA's hawkish hold, arguing it strengthens the case for being long on AUD/USD and AUD/NZD. This decision has reduced speculation about rate cuts and even led to some pricing in potential rate hikes. Meanwhile, NZ’s Chief Economist sounded less hawkish, supporting the long AUD/NZD trade.
Key Points:
RBA's Hawkish Hold:
- The RBA's decision to maintain rates while adopting a hawkish tone has diminished expectations of rate cuts this year.
- This has led to the Australian rates market considering the possibility of a rate hike.
New Zealand's Economic Stance:
- New Zealand's economy has exited a recession, but the Chief Economist's less hawkish tone has influenced the market.
Market Reactions:
- Investors are increasingly favoring long AUD/NZD trades.
- The AUD has strengthened against the USD following softer US retail sales data and continued market pricing of Fed rate cuts.
Future Influences:
- The release of US core PCE data in the coming week will be critical.
- Further easing in core inflation could bolster both the AUD and NZD.
Conclusion:
Credit Agricole's analysis supports a bullish outlook for AUD/USD and AUD/NZD, driven by the RBA's stance and market reactions to US economic data. The improved relative rates setting for these currency pairs will be tested by upcoming US core PCE data.
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