Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
Access all our platforms from a single account.
Another dovish domino falls
Kay Van-Petersen
Global Macro Strategist
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.
That the market was surprised by today's dovish turn by the Reserve Bank of New Zealand can clearly be seen in the ensuing price action, which saw USDNZD drop 1.61% to 0.6797 and AUDNZD rise 1.06% to 1.0440 in the Asian afternoon.
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!
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!
Latest Market Insights
Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Quarterly Outlook
Commodity Outlook: Commodities rally despite global uncertainty
Quarterly Outlook
Quarterly Outlook
-
-
Quarterly Outlook
Commodity Outlook: Commodities rally despite global uncertainty
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
Upending the global order at blinding speed
John J. Hardy
Global Head of Macro Strategy
We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ... -
Quarterly Outlook
Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever
Jacob Falkencrone
Global Head of Investment Strategy
-
Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
-
Quarterly Outlook
Equity Outlook: The ride just got rougher
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
China Outlook: The choice between retaliation or de-escalation
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
Commodity Outlook: A bumpy road ahead calls for diversification
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX outlook: Tariffs drive USD strength, until...?
John J. Hardy
Global Head of Macro Strategy
-
Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy