Those are the forecasts from TD for the Reserve Bank of Australia and Reserve Bank of New Zealand

On the RBA, TD:

  • say they have pencilled in cuts for July and November 2019 and May 2020
  • Making inroads into cutting spare capacity is the major driver for RBA cuts
  • We think the AUD has bottomed and a broadly weaker USD profile reinforces a push back above 0.70 in H2
  • Risk is: The RBA cuts more aggressively than our 2019 forecast."

On the RBNZ:

  • Deteriorating fundamentals
  • firmer NZD

are catalysts for RBNZ cuts.

Trade:

  • we like buying AUDNZD dips towards 1.04
  • Rallies are likely capped in the short-term around the 1.07 level
  • Risk: The increase in capital requirements drives the RBNZ to cut in 2020 to 0.75%
  • Where we could be wrong: The likelihood of a truce between the US and China would remove pressure on Central Banks to ease. Any signs that spare capacity is being absorbed faster than anticipated and/or domestic consumption and investment picks up would provide the RBA and RBNZ time and hold off from easing.