UBS says to sell EUR/NZD and notes overly-aggressive easing priced into RBA
UBS says its strongest direction view is short EUR/NZD
UBS notes that December is the strongest month for NZD/USD on average over the past 20 years and that a crowded NZD-short is vulnerable. They also note that US tariffs against France (which were imposed hours ago) are a potential negative catalyst for the euro.
NZD experiences favorable seasonals in December, short EURNZD is positive carry, and while NZDUSD option implied positioning is already to the topside, momentum has room to continue moving higher. This trade should be relatively uncorrelated to Brexit and benefit from any surprise US retaliation against France as a result of the USTR's digital tax investigation report which will be released on December 2nd.
Separately, on the RBA they write:
Of the central banks that will be meeting over the next several weeks, the RBA stands out here given it is the most aggressively priced amongst central banks for cuts in the 2nd and 3rd meeting. The risk-reward of paying the March meeting looks increasingly attractive for a US-China Phase 1 agreement scenario, particularly ahead of a potential postponement of December 15 tariffs now that the Hong Kong Bill is signed and behind us.
A cut is 8% priced in for today but that jumps to 66% for the Feb meeting and 80% in March.