While today’s inflation report has given the Australian dollar a boost it’s unlikely to prevent the currency falling below parity against the New Zealand Dollar.
That’s the view of Westpac’s senior currency strategist Sean Callow who believes the AUD-NZD pair “is likely to remain heavy so long as Australia’s sluggish economy keeps the RBA considering further easing and the RBNZ continues to signal a steady hand”.
Callow believes the AUD will spend “at least a little time below (parity) soon” sighting the Reserve Bank of New Zealand policy meeting on April 30 as one potential catalyst that could lead to an exploratory move lower.
Should this happen Callow believes it would be an “overshoot”, or a larger-than-warranted move from his perspective. He suggests fair value for the pair at present based on yield differentials, relative commodity prices and risk sentiment is “around 1.06”.
At the time of writing the AUD-NZD was at 1.0118.
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