Commentary on the Australian and New Zealand dollars via BNZ

This in (very) brief:

  • The "deal" should for now spare AUD and NZD retests of early October lows assuming USD/CNY ranges beneath September highs, but it isn't a pretext for higher AUD or NZD forecasts.
  • The significance of Friday's agreement, slender as it is, is that for the time being at least it challenges the assumption underlying our current end-of-year forecasts of 0.65 for AUD/USD and 0.6150 for NZD/USD.
  • All we would say for now is that the chances of a near term re-test of the early October post-GFC lows on AUD around 0.6770 and NZD just above 0.62 have receded a little.

The lack of enthusiasm for the agreement is evident from analysts, this for example via Standard Chartered:

  • a 'mild compromise'
  • likely to boost risk sentiment in the short term
  • unlikely to reverse the deterioration in economic fundamentals that we see in Asia, Europe and now in the US