We still think the future is brighter for Kiwi than Aussie

While we have revised up our end-2021 forecasts for the Australian dollar and the New Zealand dollar against the US dollar to reflect the strength of their recent rallies, we still think that the Kiwi will outperform the Aussie over the next couple of years. Regular readers of our Global Markets service will know that we have been of the…
Simona Gambarini Markets Economist
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FX Markets Weekly Wrap

FX markets likely to remain volatile into year-end

After rallying to its highest level of the year last week, the US dollar seems set to end this week broadly unchanged. In our view, this reflects the offsetting effects of rising short-term yields in the US (particularly after Chair Powell’s comments to Congress on Wednesday) and falling long-term yields amid growing concerns about the Omicron variant. Despite today’s mixed payrolls report, we think the bigger picture remains that sustained inflationary pressures in the US are likely to support faster policy normalisation by the Fed and keep the dollar strong. In addition to uncertainty about the Omicron variant, we expect next week’s CPI data from the US and the wide range of central bank meetings to keep volatility in FX markets elevated throughout December.

3 December 2021

FX Markets Update

We anticipate that the rand will remain weak

The South African rand has rallied over the past few days after reaching its lowest level against the US dollar in more than a year following last week’s news about the Omicron variant. Even if the new variant doesn’t lead to a major round of renewed virus containment measures, we think that the currency will remain under pressure from both domestic and external headwinds for much of 2022. In view of the wider interest, we are also sending this FX Markets Update to clients of our Africa Economics Service

1 December 2021

FX Markets Weekly Wrap

COVID throws another curveball

News late yesterday of a new and potentially more dangerous variant of COVID-19 emerging in South Africa has made a dramatic impact on financial markets today. In general, market shifts have been similar to those in previous periods of renewed uncertainty around the path of the pandemic. Risky assets and currencies have fallen across the board today, while bond yields have dropped sharply and safe havens – notably the yen – have rallied. Short-term rate expectations, which had risen significantly in the US and other DMs over recent months, have been pared back rapidly.

26 November 2021

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Global Markets Update

We expect gradual increases in 10-year DM bond yields

We think most developed market (DM) central banks will look through temporary rises in inflation and leave rates unchanged until at least early 2023. Even so, we expect the yields of 10-year DM government bonds to rise in the next couple of years, although generally by more in the US than elsewhere.

3 June 2021

EM Markets Chart Book

We think EM equities will rise, not shine

We forecast that emerging market (EM) equities will make further gains between now and end-2022 as the global economy recovers further. However, they have lost a bit of ground to developed market (DM) equities recently and we doubt they will perform much better than them in the coming year and a half.

27 May 2021

Capital Daily

We think 10-year yields will rise gradually in most cases

While the RBNZ is gearing up to hiking rates next year, we think that most developed market (DM) central banks will look through temporary rises in inflation and leave rates unchanged until early 2023 at the earliest. This feeds into our forecast that the yields of 10-year DM government bonds will rise only gradually, in most cases, over the next couple of years.

26 May 2021
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