AUD/NZD: Deserved Divergence

AUD/NZD has reached its highest level in over a decade, driven by relative terms of trade and AUD's sensitivity to energy and metal prices. However, stretched positioning creates a risk of reversal if the RBA turns less hawkish or the commodity backdrop shifts.

Key Takeaways

• 1.AUD/NZD is at decade-high levels, which is justified by relative terms of trade despite being 4pp higher than traditional cyclical models suggest.
• 2.AUD exhibits asymmetric outperformance on days when oil prices rise, reflecting investor sentiment that current energy shocks remain supportive for the currency.
• 3.Positioning in both currencies looks stretched, creating a risk of reversal if RBA communication shifts, domestic data disappoints, or terms of trade support fades.

Table of Contents

• AUD/NZD—Deserved Divergence, For Now
• G10 FX Strategy Team
• Disclosure Appendix
• Global product; distributing entities
• General disclosures

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