Due to its significant impact on public health and the global economy, the Covid-19 pandemic has been the most important topic for financial markets since the first months of 2020. Now, however, the market is starting to look more closely at the signals and actions of central banks, Ebury analysts note in the report.
"We assume that 2021 will see a rise in interest rates in Norway and New Zealand, and the currencies of these countries – and those on their way to a tightening cycle by the end of next year – should perform exceptionally well against the rest of the G10. At the same time, the expected rate hike in emerging market countries supports our positive outlook on the outlook for currencies in this group in the medium term," the report reads.
The rapid spread of the coronavirus has triggered a major currency reshuffle, initially strengthening safe-haven currencies and leaving some emerging market currencies at record lows. However, since the peak of the market panic in March 2020, these trends have changed, and risk sentiment has improved following successful vaccination programs in many countries, especially developed countries.