Previously we talked about a simple idea for AUDNZD based on the Carry Trade strategy. The idea was based on the following assumptions:
-The economies of the two countries are structurally linked based on their geographic proximity.
-The interest rate in New Zealand is 0.25%, and in Australia – 0. As is known, capital is attracted to countries with a higher interest rate. In our case, the difference plays in favour of appreciation of the New Zealand Dollar.
-The higher interest rate in New Zealand compared to Australia stimulates a tighter approach to monetary policy in the Kiwi country which also creates conditions for appreciation of NZD in relation to AUD.
Apart from this, yesterday new data were published regarding consumer sentiment in Australia. In July, the value was 1.5%, but for August we got a negative number (-4.4%).
That’s why it can be predicted with great confidence that in the near future there will be continuation of the bearish scenario for AUDNZD.
This content is for informational purposes only and is not intended to be investing advice.
