NZD/USD: Odds for NZ rate cut?

  • The Reserve Bank of New Zealand (RBNZ) is expected to maintain interest rates unchanged at 5.5%, despite earlier discussions about potential rate hikes.
  • Analysts and traders are closely watching for any hints of a more hawkish stance from the RBNZ, particularly in light of the New Zealand economy’s recent entry into a technical recession.

This week the Reserve Bank of New Zealand (RBNZ) is expected to maintain interest rates unchanged at 5.5% Interestingly, as recently as February this year, the RBNZ was still deliberating rate hikes.  

Presently, the market attributes a 4% probability to a rate cut. The earliest feasible moment for a rate cut could be in November. However, the New Zealand economy entered a technical recession in the latter half of 2023, which could potentially prompt the RBNZ to consider rate cuts if economic fragility persists. 

Gareth Kiernan, the chief forecaster at Infometrics, anticipates a potentially more hawkish stance in the RBNZ’s statement compared to February. 

Despite New Zealand’s slightly more favorable interest rate differential, the Kiwi dollar has not managed to outperform the US dollar. Kiwi bulls are currently facing potential resistance at 0.6040 and then the 200-day simple moving average. On the downside, support could lay at 0.5993 and 0.5940. 

Traders might also like to closely monitor the upcoming US CPI figures. A positive surprise in the data could reignite momentum for the US dollar and push the NZD/USD pair down past its current weak trendlines. 

Import the BlackBull Markets Economic Calendar to iCloud, Google, or Outlook to get alerts direct to your inbox, enabling you to plan your positions in advance and seize trading opportunities.    

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