Westpac’s dealing desk is urgent three interconnected bets that every one level to the identical theme: the US greenback’s dominance is cracking, and antipodean currencies are able to capitalize. This can be a theme that I’ve additionally been writing about.
Commerce #1: The Aussie Juggernaut
The headline commerce is an extended AUD basket launched at 100.0 on October twenty ninth, focusing on 105.00 with stops now at breakeven. The elemental backdrop is stacking up properly. Markets are pricing in 18 foundation factors of RBA tightening for subsequent week’s assembly, a dramatic shift that is caught some offside. However even when Governor Bullock disappoints the hawks and talks down additional hikes, Westpac sees restricted draw back danger.
Why? Three stable pillars: CNY’s gradual grind decrease is lifting Australia’s aggressive place, commodities are holding agency, and MSCI ex-US equities are displaying that basic new-year energy. AUD/USD was final down 18 pips to 0.7023.
Commerce #2: The Greenback Quick
The broader play is a brief USD basket, initiated December eleventh at 100.0, additionally focusing on 105 with stops at entry. Certain, the dollar caught a bid after Treasury Secretary Bessent dominated out coordinated FX intervention with Japan, and Powell’s current feedback downplayed labor market considerations. However Westpac sees this as noise.
“The deeper structural pathologies that ail the USD are nonetheless there, together with valuation, and a post-Davos reassessment of the geopolitical order that revives long run USD credibility and doubts about US allocations,” Westpac writes.
Commerce #3: The Kiwi Comeback
Lastly, there’s NZD/USD. Westpac nailed the January dip to 0.5711, and people who adopted their authentic purchase suggestion are sitting on 6% positive aspects.
“Our end-2025 publication describing excessive conviction trades for 2026, we advocated shopping for NZD/USD on any dip to 0.5700, focusing on 0.6100. NZD/USD did dip to 0.5711, on 9 January, and has risen 6.0% since (to 0.6051),” they be aware.
Now they’re seeking to reload on any pullback to 0.5880, focusing on 0.6100+ with a cease at 0.5830.
The logic is easy: mix a bearish greenback view with an enhancing New Zealand economic system. GDP nowcasts from each Westpac and the RBNZ, plus their very own financial pulse fashions, present inexperienced shoots. The large query—whether or not this restoration has legs by means of 2026—will not be answered till Could’s knowledge dump (Q1 CPI, labor market, This autumn GDP). However Westpac’s prepared to offer NZ the good thing about the doubt for now, so long as the entry level affords respectable risk-reward.
NZD/USD each day
I believe it is spectacular that NZD is up at present regardless of an enormous risk-off day.
