The australian dollar faces increasing downside risk as the zero covid policy could affect growth, reinforcing the divergence with the New Zealand dollar, they explained. MUFG analysts Bank. They have a business idea to shorten AUD / NZD with a target at 1.0250 and a stop loss at 1.0750.
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“We have had some data released this week that we believe will increasingly see investors question the stance of the zero covid policy given the potential impact on growth if infections continue to rise. Retail sales in June fell 1.8%, much weaker than expected, while today the July composite PMI fell to 45.2, the lowest since May 2020. These developments will only reinforce the divergence with New Zealand, where policy monetary will tighten much sooner. “
“We recognize that there is a clear risk that the Bank of New Zealand’s rate hike expectations could be lowered, but we believe that rising inflation in New Zealand last week (1.3% quarterly versus 0.7% expected) will leave the Bank New Zealand’s most determined to remove political stimulus assuming there are no new COVID outbreaks in New Zealand. “
“The NZD should be less sensitive to global developments, while Australia’s domestic developments will add to the AUD’s woes. New Zealand today announced the suspension of all non-quarantine travel from Australia for 8 weeks, which should limit risks in New Zealand, where there are currently 80 active COVID cases, with an increase of 20 in the last 24 hours and all confirmed. on the border ”.
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