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Forex Flash: Stay short AUD/NZD – UBS

FXstreet.com (Barcelona) - The AUD/NZD finished the day down 20 pips at 1.2060 (lowest close since Oct 2009). The pair has been in a steep downtrend for the last six weeks, and some analysts see no reason to expect anything different going forward.

“We went short AUDNZD as a trade recommendation on Jan 31st in the expectation that monetary policy settings in Australia and New Zealand would start to converge later this year. The adjustment could happen in either direction - our economists think a more hawkish RBNZ is more probable than a more dovish RBA, although either outcome would suit our purposes. Incoming evidence reinforces our view Another piece of evidence arrived overnight in support of this trade -commodity prices of direct relevance to New Zealand's exports registered their largest monthly increase on record (+10.2% m/m measured in NZ$). Meanwhile, the price of Australia's commodity basket remains subdued.”

Furthermore they added,” Looking beyond commodities, booming NZ house prices have already triggered hawkish rhetoric, culminating in a shift towards a slight tightening bias at last week's RBNZ policy meeting. A watchful eye is also being kept on the accelerating post-earthquake reconstruction effort, given its potential to boost inflationary pressures more generally. Meanwhile, the RBA clings to an explicit easing bias and seems in no hurry to drop it”

Forex: AUD/USD awaits Aus PPI Q1 below 1.0260

AUD/USD is currently at 1.0256 bids, pressing against session highs at 1.0260 following the AIG Services index for Australia that showed the worst result in last 4 months at 44.1, easing from previous at 49.6. With China and Japan both closed today again this week, domestic ASX index futures are at break even for the day.
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Forex Flash: Aus April services PMI another weak data - Westpac

Australia’s data calendar offers limited guidance ahead of Tue’s RBA meeting, comments Sean Callow, FX strategist at Westpac, "where pricing is now above 50%, with -14bp priced in, -60bp in total (Feb 2014)" he says.
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