- Both AUD and NZD seem risky to hold in a world of such high macroeconomic uncertainty, following the emergence of COVID-19.
- Nevertheless, AUD has shown a historical ability to sustain a long-term "premium" over NZD (based on a Purchasing Power Parity model).
- As Australia inflation has dipped into negative territory this year (in Q2), the real yield for AUD/NZD seems to have improved significantly.
- Meanwhile tourism is a materially more significant contributor to NZ GDP versus AU GDP. This is also reflected in a sharper GDP fall in Q2 for NZ.
- In the medium term, while AUD/NZD may attempt to establish a trading range 'low' in the short term, further upside is likely to be found in 2021.
For further details see:
AUD/NZD: Likely To Rise Into 2021 As Economic Risks Make The AUD Less Risky