The economic environments in Australia, New Zealand, and Canada have presented a mixed bag of challenges and opportunities in 2024. Each nation finds itself navigating unique circumstances that threaten to shape their economic paths in the coming year. This article explores these developments, providing insights into future predictions and market sentiments.
Australia’s economy has encountered a rollercoaster of events throughout 2024, primarily due to the persistent inflation that prompted the Reserve Bank of Australia (RBA) to maintain its cash rate at 4.35%. Despite these measures, economic growth remained stagnant, achieving only a 0.8% rise in Gross Domestic Product (GDP) over the year. However, the labor market showed some resilience, with the unemployment rate recorded at 4.1% in October.
The Australian dollar faced significant fluctuations in response to the dual pressures of global economic instability and domestic policy shifts. As we look towards 2025, there are cautious signs of optimism. Analysts expect the RBA to gradually decrease the cash rate as the inflation rate descends to the targeted 2-3% range by mid-to-late 2025. If these projections hold true, GDP growth might also see improvement, albeit remaining below trend levels. This outlook is bolstered by expected increases in government spending and a notable recovery in household consumption.
Moreover, the AUDUSD currency pair has seen notable depreciation, losing around 5% during 2024 alone. Recent technical analysis suggests further declines could be on the horizon, as the currency pair retreated from a peak of 0.6940 to reach a 13-month low at 0.6340. Immediate support levels are projected at 0.6270 and 0.6170, while a possible upward correction could target 0.6440, an important threshold above the uptrend line.
New Zealand has faced its fair share of economic headwinds in 2024. The Reserve Bank of New Zealand (RBNZ) acted by reducing its official cash rate to 4.25% to attempt to stimulate economic growth amidst signs of rising unemployment and weak performance in key sectors. Although inflation reached a manageable 2.2%—within the RBNZ’s target range—prices for essential services remained stubbornly high.
With forecasts indicating further interest rate cuts on the horizon, the outlook for 2025 remains cautious. The RBNZ aims to maintain inflation within a range of 1-3%, potentially reducing the Official Cash Rate (OCR) to around 3.3%. In this context, GDP growth is projected to be modest at 2.1%, with unemployment expected to stabilize around 5.2%. Wage growth is also anticipated to remain subdued, at approximately 2.8%.
The NZDUSD currency pair has been mired in a consolidation phase since January 2023, bound between resistance at 0.6380 and support at 0.5770. Unfortunately, the pair hit a 26-month low of 0.5752 as it struggles under pressure. Should the downward trend continue, targets may include 0.5700 and 0.5600, while any upward momentum could encounter resistance around 0.6040-0.6100, wherein the moving averages will also come into play.
Canada’s economy has exhibited its own set of challenges in 2024 as the Bank of Canada (BoC) reduced its policy rate to 3.75% to perhaps counteract sluggish growth and rising unemployment rates. While inflation rates dropped to around 2%, matching the BoC’s target, the uneven distribution of inflation across different sectors has complicated the economic landscape.
Despite these hurdles, a cautiously optimistic outlook for 2025 is beginning to take shape. As inflation pressures ease, the BoC is expected to continue lowering interest rates to promote economic activity. This is projected to yield a gradual improvement in GDP growth, fueled by increased consumer spending and business investments. However, the labor market may not experience immediate relief, with unemployment likely to remain elevated.
The USDCAD has emerged as a notable market player in 2024, surging to a fresh four-and-a-half-year high of 1.4244 after bouncing off a critical level at 1.3420. Resistance levels are on traders’ radars, particularly the April 2020 peak at 1.4265. Should traders clear psychological barriers such as 1.4300 and 1.4500, momentum may buoy the currency further, even as immediate supports at 1.3945 and the 50-day SMA at 1.3675 loom in the background.
As Australia, New Zealand, and Canada maneuver through a complex economic landscape, the coming years will be critical for each nation’s recovery and growth strategies. From cautious rate cuts to fluctuating currencies, each country must navigate its unique circumstances in a volatile global economic environment. The effects of policy decisions and market sentiments will play a pivotal role in shaping the financial futures of these economies, emphasizing the need for ongoing vigilance and adaptability in their approach.