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05 Apr 2023

05 Apr 2023

Recession worries

• Recession worries. Softer US labour and services data has fanned recession fears. Cyclical assets have weakened. US bond yields have fallen.• Firmer USD. The USD has edged up with safe-haven flows counteracting the step down in rate expectations. NZD unwound yesterday’s spike generated by the larger RBNZ rate hike.• AUD/NZD lower. AUD/NZD hit a fresh 2023 low after the RBNZ announcement. We expect AUD/NZD to rebound over the medium-term. The RBNZ’s actions should lead to a meaningful NZ downturn. Markets have remained on the defensive overnight as US recession risks continue to build. US equities slipped back. The S&P500...

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05 Apr 2023

Cross-Check: AUD/NZD – RBNZ Shock & Orr

AUD/NZD has slipped below ~$1.0630, touching a new 2023 year-to-date low in the wake of the diverging RBA and RBNZ decisions and shift in relative interest rates. The policy-driven Australia-NZ two-year swap spread has slumped to -175bps, the most negative since mid-2007. In contrast to the RBA who ‘paused’ its rate hike cycle and softened its conditional tightening bias at its April meeting (see Market Wire – RBA: over and out), the RBNZ unleashed its inner hawk and delivered another outsized 50bp hike. Consensus expectations were looking for a smaller 25bp lift, so the direction of travel wasn’t surprising, just...

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