Ceasefire deal and divergent policies

What the desk is arguing

The desk asserts that the pricing of the ceasefire deal and its effects on oil prices will create headwinds for the Australian Dollar. MUFG notes that optimism surrounding Brent crude's future trajectory has contributed to its decline by almost 20%, which could adversely impact currencies tied to commodity exports like the AUD.

Data from the report emphasizes that the AUD/NZD pair has seen its largest fall since 2016, reflecting shifting market dynamics influenced by geopolitical factors. This depreciation underscores the market’s reevaluation of risk sentiment, further solidifying the desk's outlook on these currencies.

Where it sits in our coverage

The consensus target for AUD/NZD stands at 1.075, with a range between 1.04 and 1.12. Key firms include: - jpmorgan: target of 1.10, tenor Mar26 - bofa: target of 1.04, tenor Mar26

This perspective aligns with jpmorgan's stance while it diverges from bofa's more cautious outlook on the pair's future performance, suggesting a bullish sentiment compared to their lower target.

How other firms see it

Firms such as jpmorgan and citi are aligned in viewing AUD as potentially undervalued given the oil price dynamics, while bofa maintains a bearish outlook on AUD. The market sentiment seems concentrated around commodity price movements, affecting currencies across the board, particularly in pairs like AUD/JPY and NZD/USD, which closely correlate with external economic conditions and monetary policies.

What the calendar says

No major calendar events are anticipated that could directly impact the AUD/NZD in the coming weeks, leaving traders to focus on evolving geopolitical landscapes and commodity price shifts.