I have a lot of cricket fans in my office and it is that time of the year again — the excitement during the Ashes is palpable.
I can’t count myself as one of them, nor do I have profound knowledge of the game, but a crash course has taught me that the Antipodean teams often win, while the English team has a tougher time. Indeed, Sunday marked a crushing defeat for England against the Aussies in what media are calling a “bloodbath.”
But in the currency markets – a world more familiar to me than cricket – the tables are turned.
Sterling seems to have hit a 6, thanks to Bank of England Governor Mark Carney’s warnings about a rate hike “moving closer.”
Meanwhile, the Australian dollar (AUD), weighed down by commodity price weakness, is languishing at 6-year lows and the New Zealand dollar (NZD) is getting out for the golden duck (OK, enough with the cricket idioms now), having fallen some 17 percent against the U.S. dollar in 2015, not helped by the increasingly hawkish Federal Reserve.
At the start of 2014, economists at HSBC called New Zealand’s economy the “rock star” of 2014. It was expected to outperform most other G-10 countries as a result of construction spending, the country’s booming housing market and — maybe most importantly — rising dairy prices supported by strong demand from China. New Zealand is the world’s biggest dairy exporter, accounting for a third of the world’s trade.
Even if you are no economist, you will have heard that the once-insatiable Chinese demand has since slowed. Dairy prices have gone bad. The price of skimmed milk powder has slumped by almost 50 percent over the last 12 months, according to Global Daily Trade. While the Reserve Bank of New Zealand (RBNZ) was the first G-10 central bank to hike rates after the crisis in 2014, it has now dramatically reversed course.