So far, central banks for commodity currencies have been moving in opposing directions. The RBA was on the other side, keeping rates stable despite high inflation. Because the Australian market was more susceptible to disruption by the banking sector, growth has been slow.
At the other end of the spectrum was the RBNZ which did a “double” hike, surprising the markets. It was all about reducing inflation and fixing runaway housing costs that were already a problem in the wake of the pandemic.
The common thread
Both rate decisions share one thing in common: the impact of commodities. Exports of consumer goods to China are New Zealand’s main source of income, while iron ore sales drive the Aussie. China’s less than stellar economic growth figures over the last couple of months have put a crimp on expectations of commodity strength thanks to Chinese demand.
Canada is unique in that the US is its largest export market. Expectations of a weaker US dollar have helped boost commodity prices. Despite high inflation, the Fed is expected to ease up on its hiking. Crude oil prices may be subject to further political…
