Title: Bank of America Recommends Buying AUD/NZD Due to Interest Rate Divergence – Is it a Good Investment?
Bank of America Securities has advised foreign exchange traders to consider purchasing the Australian dollar versus the New Zealand dollar, citing the differing interest rate expectations. The AUD/NZD pair is currently trading at 1.0869, with a recommendation to buy at 1.0877 and a target of 1.13 by year-end.
The Reserve Bank of New Zealand is expected to deliver two rate cuts this year, while the Reserve Bank of Australia is unlikely to cut until 2025. Australia’s July CPI inflation exceeding consensus strengthens the belief that the RBA will maintain its hawkish stance, contrasting with the market’s expectation of a cut by year-end.
The recent decline in AUD/NZD has been driven by positioning, with the analysts noting that the uptrend channel support at 1.0850 is expected to hold. However, risks include a continued USD sell-off, which tends to weigh on AUD/NZD, as well as weak demand for Chinese commodities.
In conclusion, considering the interest rate divergence and economic factors, buying AUD/NZD could be a lucrative investment opportunity. It is essential to monitor the market conditions and potential risks to make an informed decision about this trade.