Barclays: The Australian Dollar is expected to underperform against the New Zealand Dollar due to diverging central bank policies in the two countries.

Barclays pointed out in a report that due to the divergence in the economies and central bank policies of Australia and New Zealand, it is expected that the Australian dollar will underperform the New Zealand dollar. Barclays' foreign exchange strategist Skylar Montgomery Koning stated in the report that with the slowdown in the Australian economy, there is a higher risk of dovishness from the Reserve Bank of Australia; on the other hand, the New Zealand economy is growing at an accelerating rate and inflation has also rebounded. Barclays recommends shorting the Australian dollar against the New Zealand dollar before the next policy meeting of the central banks of both countries. Barclays expects the Reserve Bank of Australia to cut interest rates by 25 basis points on Tuesday and to make at least three more similar cuts in the following quarters. Barclays predicts that the Reserve Bank of New Zealand will cut interest rates once this month, but given the expected end point rate of close to 2.9%, this central bank will likely proceed cautiously.