AUD/NZD: Underperformance bias with no further RBA hikes expected this year – TD Securities

TD Securities maintains a negative outlook on the Australian Dollar in relation to the New Zealand Dollar following the Reserve Bank of Australia's September decision. With the cash rate at 4.60% and no further hikes anticipated this year, they anticipate AUD underperformance to persist. The Reserve Bank acknowledged that consumption, housing, and labor conditions were easing broadly as expected.

While capacity pressures continue, the Board did not highlight domestic pressures being overheating. Therefore, the longer the RBA delays its decision to hike, the more comfortable they will likely be with holding the cash rate. ANZ's 2-year consumer inflation expectations were updated to reveal that expectations peaked three weeks ago.

Household spending data for August showed broad-based declines across six of nine categories, with the exception of a 2.3% month-over-month gain in transport spending. Despite this, overall spending was flat month-over-month, excluding transport, which decreased by 0.4% month-over-month. The analysts' bias remains for front-end cross-market outperformance and for AUD underperformance, particularly against the NZD.