Many analysts are keeping the faith with the Australian and New Zealand dollars, projecting moderate gains in coming months even as markets move aggressively to price in the risk of interest rate cuts in both countries. A Reuters survey of up to 50 analysts saw the median prediction for the Aussie stay at $0.7200 on a three-month horizon, unchanged from the previous poll.
The median forecast was also for $0.7200 in six months and $0.7400 for a year ahead, again unmoved from the prior poll.
That looked like a brave call given the Aussie hit a three-month low of $0.7020 on Thursday in the wake of dismal data on economic growth for the December quarter.
The marked slowdown combined with sliding home prices and sluggish wages to convince investors the Reserve Bank of Australia (RBA) will have to change course and cut interest rates again.
The futures market has fully priced in a quarter-point cut in the 1.5 percent cash rate for October this year, compared to February 2020 at the start of the week. A further move to 1.0 percent is priced as a 50-50 chance.
Yields on three-year government debt, the most liquid of the short-term bonds, have dived 60 basis points since November to stand at 1.59 percent, near their lowest since late 2016 and only just above the cash rate.
They are also 90 basis points below yields on comparable US Treasury debt, close to the biggest gap on record and a constant drag on the Aussie. Robert Thompson, macro rates strategist at RBC Capital Markets, said the sheer speed and scale of the shift means the market may be due for a pause.
"A bit of exhaustion may be creeping in, with the Aussie unable to break $0.7020 on the downside," said Thompson. "We expect this to ultimately reach $0.6600, but it may take a period of consolidation before a further break lower becomes possible."
The median prediction was also kind to the kiwi, putting it at $0.6800 in three months and six months, and $0.7000 on a one-year view. The three-month view has firmed slightly and the rest unchanged from the previous poll. The currency was at $0.6789 on Thursday having slipped in the past week as investors also narrowed the odds on a cut in New Zealand rates.