A simple idea for AUDNZD based on the Carry Trade strategy

08 July 2021 165
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1.      The economies of these two countries have a strong structural link because of their geographic proximity. In fact, together they represent a single economic zone.

2.      The interest rate in New Zealand is 0.25%, in Australia – 0.1%. As is well-known, capital flows in countries with a higher interest rate. In our case, it is a plus towards New Zealand’s financial karma.

3.      Other macroeconomic factors also point towards the relative strength of the Kiwi dollar: a relatively low unemployment rate (compared to Australia) and a higher inflation rate which makes the country stick to tight monetary policy. 

Based on the abovementioned facts, the forecast for the medium term is the following: AUDNZD will fall. 

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