Forex Flash: AUD/NZD remains driven by monetary convergence – UBS

FXstreet.com (Barcelona) - Recently, we went short on the AUD/NZD as a trade recommendation on Jan 31st in the expectation that monetary policy settings in Australia and New Zealand would start to converge later this year. According to Research Analyst Gareth Berry at UBS, “The adjustment could happen in either direction - our economists think a more hawkish RBNZ is more probable than a more dovish RBA, although either outcome would suit our purposes.”

Another piece of evidence arrived overnight in support of these views – commodity prices of direct relevance to New Zealand's exports registered their largest monthly increase on record (+10.2% MoM measured in NZD). Meanwhile, the price of Australia's commodity basket remains subdued.