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New Zealand Dollar faces one final CPI release before the RBNZ
- A fourth consecutive session of gains lifts NZD/USD to its strongest level since 23 September.
- An RBNZ rate rise to 3.00% on 28 October carries roughly an 80% probability in swaps pricing.
- Wednesday brings New Zealand’s third-quarter CPI, the final release before the RBNZ decision.
From just above 0.5650, NZD/USD advanced to just below 0.5700 on Tuesday and finished close to that level. Its fourth consecutive daily rise brought the pair to its strongest level since 23 September, roughly 135 pips above the 14 October low, which had marked its weakest point since April 2025.
A quarterly increase of 0.8% is forecast for Wednesday’s Consumer Price Index (CPI), exactly matching the Reserve Bank of New Zealand’s (RBNZ) projection to the decimal. It is the final CPI release before the 28 October decision, for which swaps imply roughly an 80% probability of an increase in the 2.75% Official Cash Rate (OCR) to 3.00%. For the Fed’s decision on the same day, futures put the likelihood of unchanged rates at about 83%.
With New Zealand importing all its refined fuel since its sole refinery closed in 2022, Tuesday’s decline in Crude Oil reduces the fuel bill it must settle in foreign currency. The annual trade deficit expanded from $5.61 billion to NZD $6.18 billion in September.
CPI leads the economic calendar
Annual inflation is expected to ease from 4.1% to 3.8% when Stats NZ publishes third-quarter CPI on Wednesday at 21:45 GMT. That would be a tenth below the RBNZ’s 3.9% projection. An outcome beneath that projection has implications for whether the 28 October rate rise proceeds.
An increase from 199K to 200K is forecast for US weekly jobless claims, scheduled for Thursday at 12:30 GMT. The US week then concludes with Friday’s S&P Global and University of Michigan surveys at 13:45 GMT and 14:00 GMT respectively, ahead of the Fed’s own decision on 28 October.
NZD/USD approaches the 50-day EMA
Having regained almost a third of the decline from just below 0.6000 in August, NZD/USD’s rebound from the 14 October low leaves Tuesday’s high about 20 pips beneath the 50-day Exponential Moving Average (EMA). The 200-day EMA sits near 0.5800.
Daily price chart: NZD/USD
New Zealand Dollar: Key Questions Answered
Known as the Kiwi, the New Zealand Dollar (NZD) is a familiar currency among investors. New Zealand’s economic health and central bank policy largely determine its value, although several distinctive influences also affect its movements. As China is New Zealand’s largest trading partner, developments in the Chinese economy tend to influence the Kiwi. Weak Chinese economic news is likely to imply fewer New Zealand exports to China, weighing on New Zealand’s economy and, in turn, its currency. Dairy prices are another important driver because dairy is the country’s principal export. Higher prices increase export earnings, supporting both the economy and the NZD.
Keeping inflation close to the 2% midpoint of a 1% to 3% range over the medium term is the Reserve Bank of New Zealand’s (RBNZ) objective. The bank sets interest rates at a level intended to achieve and sustain that goal. If inflation becomes too high, the RBNZ raises rates to slow the economy. Higher rates also lift bond yields, making investment in New Zealand more attractive and thereby supporting the NZD. Lower rates, by contrast, tend to weigh on the currency. NZD/USD can also be strongly influenced by the interest rate differential: the gap between actual or expected New Zealand rates and those set by the US Federal Reserve.
By helping investors assess the economy’s condition, New Zealand’s macroeconomic releases can influence the value of the New Zealand Dollar (NZD). Strong growth, low unemployment and high confidence underpin a healthy economy and support the currency. Robust economic growth draws foreign investment and, when accompanied by elevated inflation, may prompt the Reserve Bank of New Zealand to raise interest rates. Weak data, on the other hand, is likely to lead to NZD depreciation.
When investors judge wider market risks to be low and feel optimistic about growth, the resulting risk-on conditions tend to support the New Zealand Dollar (NZD). Such periods generally improve the outlook for commodities and for ‘commodity currencies’ including the Kiwi. During market turmoil or economic uncertainty, the reverse tends to occur: investors sell riskier assets in favour of more stable safe havens, leaving the NZD weaker.
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