- Darren Gibbs, chief economist at Deutsche Bank
The Aussie and kiwi will most likely be driven by the Federal Reserve's interest-rate guidance. Even despite the strength of both Australian and New Zealand economies, both currencies are likely slide versus the U.S. Dollar in the foreseeable future.
Nevertheless, both economies and specially New Zealand are on the mend. The RBNZ became the first central bank among developed economies to start raising interest rates, with more hikes in the schedule. Stronger exports, construction and housing market are the main pillars of the New Zealand growth. One of the them, however, is facing a significant risk that can derail the growth in the sector.
Migration to New Zealand hit the highest point in more than a decade, with more Chinese than Britons settling in the country for the first time in 10 years. According to Statistics New Zealand, the number of migrants rocketed to 3500 in February– the highest monthly gain since April 2003. While due to the economic improvement less Kiwis are leaving the country, more people arrive. Constantly rising migration is adding more pressure on the housing market– a key source of the upside risk to the central bank's growth outlook. Moreover, it can lead to stronger inflation, hence, the RBNZ will be forced to make another rate hike even sooner than expected, suggesting the NZD/USD pair will receive another bullish impetus.
© Dukascopy Bank SA