Market Musing: 2026 FX Outlook
Read the 2026 Currency Outlook from Corpay Currency Research
As 2026 gets underway a remarkable sense of calm has settled over global markets despite a lot of headline noise. Economies have emerged from a year of US-centric macro and geopolitical shocks bearing fewer scars than feared. Growth has held up, price pressures have remained restrained, financial conditions are loose, and cross-asset volatility has fallen. In our view, markets are unusually calm precisely when the world beneath them is anything but. We see a few plausible scenarios that might upset the sanguine consensus in the months ahead such as a less resilient global economy as various supports fade, renewed ructions in asset markets due to triggers like valuation concerns in the tech sector, or alternatively growth positively surprises as AI related spending feeds through into productivity gains. Given the fairly wide range of potential outcomes we think FX volatility could rise from current low levels.
Markets seldom move in straight lines, and renewed gyrations may be looming, especially given the benign backdrop most are assuming. This might create a few false dawns in the USD over the near-term, but on net we believe structural and fundamental forces such as sluggish US activity and interest rate cuts by the Federal Reserve should see it lose ground as the year unfolds.
In terms of the AUD, it shouldn’t be forgotten that it tends to be volatile. The AUD has, on average, traded in a ~8 cent annual range the last 3-years, and over the longer-run the average calendar year range has been even larger (~13 cents since the mid-80’s float). More swings in the AUD should be anticipated, but on balance we feel it should gradually outperform a softer USD and most of its major peers as 2026 progresses. Sturdy domestic conditions and lingering inflation pressures make further rate cuts by the RBA unlikely. Indeed, interest rate hikes are back on the agenda. Policy divergence with the Federal Reserve and improving yield differentials could, in our judgement, provide medium-term support for the AUD, as should improving US–China trade relations, and/or greater internally focused stimulus measures in China.
Across the Tasman, we think that after a torrid spell over the past year the tide is turning for the NZD. Headwinds are beginning to recede. On the back of a rapid and sizeable RBNZ easing cycle signs of life are returning across the NZ economy. As excess slack is gradually absorbed these improvements should feed through to the labour market which in turn may see markets start to price in a RBNZ tightening phase. Regime shifts have historically mattered for the NZD and we think this time shouldn’t be different. Looking back, the NZD has tended to strengthen in the interval between the final RBNZ rate cut and the first rate rise.
Our detailed 2026 outlook can be accessed here or via the link at the top of the email.
Peter Dragicevich
Currency Strategist - APAC
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