A Tale of Two Economies

Carry + Divergence = AUD/NZD Higher

The divergence in fortunes between Australia and New Zealand has pushed AUD/NZD up by 4.2% over the past year. With data over the past week showing core inflation in Australia is running ahead of estimates, while terms of trade slumped over in New Zealand, we feel the actions of the respective central banks into 2026 pave the way for a further move higher in AUD/NZD.

At the same time, participants can benefit from carry, with a differential over 100bps only likely to increase over H1.

Time to start adding new positions to the book to carry over into the New Year.