ANZ: Long AUD/NZD as a medium-term trade for 2025

ANZ recommends taking a long position in the AUD/NZD currency pair in early 2025 and expects AUD outperformance due to different monetary policies, growth dynamics and New Zealand’s diminishing carry advantage.

Important points:

• Year-end weakness in AUD/NZD:

  • Seasonal factors and risk sentiment tend to push the AUD/NZD lower towards the end of the year.
  • Strong NZD demand due to seasonal exporter flows in November and December typically supports the NZD.

• Medium-term trading opportunity:

  • Current values ​​around 1.08 provide an opportunity to build long positions in AUD/NZD.
  • Target area: 1.10 and higher in 2025.

• Divergence of monetary policy:

  • ANZ expects this RBNZ to lower interest rates earlier and more aggressively than that RBA:
    • RBNZ: Cut of 50 basis points is expected in February 2025, at an overall rate of 3.4% until the end of 2025.
    • RBA: The rate cuts will begin in May 2025 with a total of just 50 basis points, leaving the key rate unchanged 3.8% until the end of 2025.

• Relative economic growth:

  • Australia’s GDP outlook appears more optimistic than New Zealand’s:
    • The RBA forecasts moderate growth, while the RBNZ expects a contraction in the third quarter -0.2% q/q before a slight recovery.
  • Australia’s lower current account deficit also supports the AUD.

Diploma:

While seasonal factors and risk sentiment could temporarily weaken AUD/NZD through year-end, ANZ sees this as an opportunity to build long positions 1.08Aim 1.10 and higher in 2025. Divergent monetary policy and stronger Australian growth momentum provide a solid foundation for AUD outperformance.

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