According to the latest market analysis, the strong position of the US dollar is expected to gradually weaken in the coming years, a trend that will have profound impacts on global currency and commodity markets. Westpac Bank stated in its November 2024 Market Outlook report that despite a short-term boost from Trump's re-election keeping the dollar strong, adjustments in the Federal Reserve's monetary policy and investors' shift toward emerging markets might lead to a moderate downward trend for the dollar in 2025 and 2026.
The oil market is similarly influenced by the direction of the dollar. A strong dollar typically suppresses oil prices denominated in dollars, while the potential weakness of the dollar could provide some support for oil prices in the medium to long term. Meanwhile, fluctuations in global energy demand and changes in geopolitical risks further exacerbate market uncertainty.
Westpac Bank expects the Reserve Bank of New Zealand to cut interest rates by 50 basis points on November 27, 2024, to stimulate economic growth. Analysts believe this move may create short-term pressure on the New Zealand dollar against the US dollar, but in the long run, a weakening dollar may provide some support for the New Zealand dollar. Meanwhile, analysts point out that as US short-term interest rates normalize, capital may gradually flow to emerging markets, further benefiting the New Zealand dollar and other emerging market currencies.
However, currency markets do not follow a single trend. Despite the expected appreciation of the New Zealand dollar against the US dollar, it may depreciate against the euro and the pound, showing diverging trends among major currencies. Analysts believe that the fundamental performance of the euro and the pound will outperform that of the New Zealand dollar, making these two currencies more attractive in relative value.
For the oil market, changes in the dollar's trajectory and the divergence in various countries' monetary policies will directly impact the global supply and demand landscape for oil. Analysts anticipate that if the Federal Reserve adopts a more accommodative policy, coupled with a gradual weakening of the dollar, global oil prices may face certain upward risks. However, this also requires attention to geopolitical situations, OPEC+ production policies, and the growth in demand for oil from emerging markets.
Overall, the global market presents a complex situation under the intertwining of multiple factors. From oil to currencies, the future trends in asset prices are influenced not only by global economic fundamentals but also by major central bank policies, geopolitical risks, and market sentiment. Investors must be wary of short-term fluctuations while focusing on long-term trends to navigate the challenging market environment.
