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Investing.com - Bank of America maintains its bearish outlook on the New Zealand dollar against the Australian dollar despite forecasting AUD/NZD to reach 1.15 by year-end 2026.
The financial institution acknowledges significant historical resistance for the currency pair, noting that since late November 2013, AUD/NZD has closed at or above 1.12 in only 18 out of 614 weeks, representing just 2.9% of observations.
BofA expresses concern about crowded positioning in AUD/NZD longs, suggesting market sentiment may be overly bullish despite the historical difficulty of sustaining levels above 1.12.
The bank identifies three potential upside risks to its NZD forecast: a rebound in Chinese consumer-led growth boosting dairy demand, neutral rates slightly exceeding estimates with aggressive monetary easing triggering stronger economic recovery, and equity market dynamics favoring the high-beta New Zealand dollar.
BofA specifically highlights that AUD/NZD could face "meaningful downside risk" if equal-weighted S&P 500 performance lags behind the market capitalization-weighted S&P 500, a scenario that would contradict current consensus estimates.
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