Another dovish domino falls
Summary: Gloom appears to be in vogue: New Zealand's central bank took the markets by surprise and joined the ever-swelling ranks of dovish central bankers.
The central bank indicated that the most likely direction of its next rate move would be down, saying also that: “The risks of a more pronounced global downturn has increased and low business sentiment continues to weigh on domestic spending.”
So we are already seeing AUDUSD swing into focus (0.7100, down 0.50% today) as the market starts to ponder the Reserve Bank of Australia's rate decision on Tuesday next week. The combination of the Federal Reserve and European Central Bank capitulations is likely causing another race to the bottom similar to what we had prior to the Fed hiking cycle.
To stand still is to move ahead in this world… as neutral under a hiking Fed is very different from neutral under a Fed that is done hiking and is sending out dovish signals.
While the AUDNZD tactical call was purely over the RBNZ decision – i.e. New Zealand domestic fundamentals trump Australian domestic fundamentals (hence why we were continuing to make lower lows in the cross even up to just earlier this week on Monday). So we can easily see this cross reversing back to 1.0300 and potentially looking to test the recent 1.0276 lows. And this could even happen before the RBA meeting!
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.
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