RBNZ hike underpins New Zealand Dollar against US Dollar – ING

A 25bp increase to 3.0% is expected from the Reserve Bank of New Zealand (RBNZ), according to ING’s Francesco Pesole, in line with consensus and market pricing. Pesole anticipates a hawkish statement intended to endorse expectations of further tightening and underpin the New Zealand Dollar (NZD). He expects NZD/USD to gain further towards year-end but retains his 4Q target of 0.5700.

New Zealand Dollar Set to Benefit from Hawkish RBNZ

"The Reserve Bank of New Zealand announces policy at 01:00am GMT tomorrow....we expect a 25bp hike to 3.0%, in line with consensus and market pricing (23bp)."

"Since the dovish September hike, higher energy prices, a weaker New Zealand dollar, and rising global rates have all argued for faster action by the RBNZ, even though 3Q inflation came in below expectations. Officials shifted to a markedly more hawkish tone in the past few weeks, and we see a low chance they will surprise with a hold tomorrow."

"We also think the tone of the statement will be hawkish, signalling further tightening ahead. Policymakers may be attempting to validate market expectations for now, even if they have little confidence in delivering the 100bp priced in for the next 12 months."

"That’s because with no new projections being published at this meeting, they won’t risk sounding committal on a rate path, and they are probably aiming to prop up the currency to reduce imported inflation."

"We see a bit more upside for NZD/USD into year-end, with the hawkish RBNZ playing a role. But we aren’t convinced the next hike will come in December in New Zealand, and we are therefore sticking to a 4Q forecast of 0.5700."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)