In times like these, when everyone’s eyes are locked on the Euro Zone and the U.S., it’s easy to overlook what’s been happening in smaller economies such as Australia, New Zealand, and Canada. But as you all know, you can make just as many pips trading the Aussie, Kiwi, and Loonie as you can by trading the euro and the Greenback. So why focus all your attention on the Euro Zone and the U.S.?
Keeping up to date with what’s been going on in comdoll nations may be just what you need to get an edge over other market players. Lucky for you, Forex Gump is in the mood to fill you in on the current state of these economies!
At first glance, it may seem as though things are going under in the Land Down Under. The most recent reports certainly suggest it, as they have shown that business confidence is at a new two-year low and that the unemployment rate has risen to a new 10-month high of 5.3%.
But in spite of all this, S&P believes that Australia is still on course to recover solidly. According to S&P, Australia’s sound domestic demand and healthy businesses and households should be able to carry it through these tough times. They’re even feeling confident enough to forecast growth of about 2% for 2011 and 3.8% for 2012!
This isn’t to say that the economic recovery is guaranteed though. You should know by now that you can’t be sure of anything in the markets! Australia faces just about as many threats to growth as any other country, and with all the uncertainty surrounding the global economy, its growth could very well falter and fall short of forecasts.
As a matter of fact, some analysts believe that the worst is yet to come for Australia and that the Reserve Bank of Australia (RBA) will have to cut borrowing costs to avoid a downfall.
Just take a look at AUD/USD and you’ll see exactly what I mean. The pair has already slipped about 600 pips below its recent high, suggesting that traders are beginning to give more weight to downside risks rather than upside risks.
Aha! It looks like the grass is greener across the Tasman Sea from Australia. Some market junkies say that New Zealand’s economy is in a better position than its neighbor’s and that it will probably continue to expand in the coming months. With the six-week-long Rugby World Cup seen to boost the economy along with the government’s continued rebuilding efforts following the earthquake that hit Christchurch in February, it’s not hard to imagine why economists are feeling giddy for New Zealand!
It comes as no surprise that the Kiwi was able to reach a new all-time high against the dollar at .8844 in July. Well, that was before risk aversion came back to haunt the markets. You see, just like Australia, New Zealand is also vulnerable to the uncertainties in the global economy. The RBNZ head honcho himself, Alan Bollard, said during the bank’s interest rate statement last night that slowing global economic activity poses a serious threat to New Zealand.
On the other hand, the outlook for the Canadian economy isn’t as promising as it is for New Zealand. In fact, there are a few naysayers who have warned that it could be the first among the G7 to dip back into recession! Yikes!
Hotshots at the Bank of Nova Scotia said that the country’s labor market might already be hinting a slowdown when it only added 7,100 jobs in August and fell short of forecasts by 10,000. Combining that with slowing growth in the U.S. (Canada’s biggest trading partner), naysaysers think that the GDP could print another contraction in the third quarter following the 0.4% dip we saw in Q2 2011.
Looking at the charts, it seems to me that the slowdown in the Canadian economy has caught the attention of traders too. USD/CAD is now flirting with the 1.0000 major handle after dipping to its low at .9400.
There you have it, ladies and gentlemen! With all the information presented on Australia, New Zealand, and Canada, which among the comdolls are you most bullish on? But wait! Before you make your call, keep in mind that it’s not just fundamentals that dictate price action. Factor in the current market sentiment before you cast your votes in our poll below.