New Zealand Dollar: Hawkish RBNZ underpins range trade against USD – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad highlights New Zealand Dollar (NZD) outperformance after a hawkish hold from the Reserve Bank of New Zealand (RBNZ). NZD/USD is expected to stay confined in a 0.5800–0.6000 band near term, as stronger US growth versus New Zealand caps upside despite a higher projected OCR path and earlier implied hikes.

RBNZ split vote supports Kiwi

"RBNZ delivered a hawkish hold. As was widely expected, the RBNZ left the Official Cash Rate (OCR) unchanged at 2.25% for a third straight meeting. However, the decision went down the wire in a 3-3 vote split."

"Governor Anna Breman, Karen Silk, Chief Economist Paul Conway voted for a hold. Carl Hansen, Hayley Gourley, Prasanna Gai voted for a 25bps hike. In this instance, the governor’s casting vote broke the deadlock in favor of staying on hold."

"Moreover, the RBNZ updated OCR path adjusted higher closer to the pricing from the swaps curve (150bps of tightening over the next three years)."

"A first full 25bps OCR hike is implied sooner in Q3 vs. Q1 2027 previously and a total of 100bps of tightening is penciled in by 2029 vs. 75bps previously."

"NZD/USD should continue to trade within a narrow 0.5800-0.6000 range in the near term. The stronger US growth outlook relative to New Zealand limits NZD/USD upside."

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