AUD/NZD: Widening policy divergence continues to drive the pair lower – MUFG

AUD/USD is trading below 0.7350, down after Reserve Bank of Australia Governor Philip Lowe RBA has pushed back against early rate hike expectations. Diverging paths for policy normalization are set to drag the AUD/NZD pair down, analysts at MUFG Bank report.

RBA unlikely to raise interest rates before 2024

“RBA Governor Lowe pushed back against market pricing for early rate increases. The RBA is still not planning to begin raising rates until at least 2024 at the earliest.”

“Governor Lowe explained that the delayed recovery in Australia in response to the current lockdowns made it appropriate to delay until February the next decision to taper QE further. By then the RBA will know more about how the economy is responding to the easing of restrictions.”

“The latest developments continue to support our short AUD/NZD trade recommendation which is moving closer to our target of 1.0250. The trade idea was recommended to take advantage of the widening policy divergence between the RBA and RBNZ as the RBNZ moves closer to raising rates while the RBA stands pat.”