BofA Predicts AUD Weakness vs NZD

BofA Predicts AUD Weakness vs NZD

Bank of America (BofA) has issued a recommendation to sell the Australian dollar (AUD) against the New Zealand dollar (NZD), arguing that a widening policy divergence between the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) will pressure the AUD lower through the end of the year.

BofA’s economists project that the RBA will keep its cash rate unchanged until mid‑2027, with the first rate cuts slated for August 2027. This outlook follows a recent Australian CPI reading that came in below consensus and dovish remarks from RBA Governor Bullock, making near‑term hikes unlikely.

Conversely, the firm expects New Zealand’s inflation to remain high and sticky, prompting the RBNZ to raise rates in September 2026 and again in December 2026. BofA believes the market is under‑pricing this divergence, which should further weaken the AUD relative to the NZD.

The recommendation is reinforced by CFTC net non‑commercial futures data showing that NZD short positions have only been partially unwound and are now near their lowest level in five years, indicating limited counter‑pressure on the NZD.

BofA notes that little additional economic data is likely to shift market pricing before the Australian monthly inflation print at the end of August, so the firm positions for a gradual move lower in the AUD/NZD pair based on the stated central‑bank outlook.