New Zealand Dollar: Growth risks temper RBNZ pricing – ING

ING notes that New Zealand’s Q2 GDP slowdown could magnify market impact given infrequent data, but the Reserve Bank of New Zealand remains focused on inflation and jobs. The bank still expects one final hike in December, with rising odds of an October move, while NZD/USD is seen driven mainly by global risk sentiment and US events, with a 0.570–0.590 range into year-end.

GDP data and RBNZ path in focus

"New Zealand publishes second-quarter GDP data overnight. Expectations are for a material growth slowdown to just 0.1% QoQ after a strong first quarter (0.8%). Those figures play a secondary role for the Reserve Bank relative to inflation and jobs, but given the low (quarterly) frequency of key data releases, the market impact can be magnified."

"At its September meeting, the RBNZ delivered a dovish surprise, signalling there is only room for another 25bp to 3.0%. That should not be taken as a commitment, and the longer energy prices remain elevated, the higher the chances of upward revisions in policy projections by year-end."

"Our call remains for the next and last hike in December, but chances of an October move are increasing, with markets pricing in around 65% probability. Tomorrow's GDP can be an important input for those October expectations."

"That said, NZD/USD remains primarily driven by global risk sentiment and US events. We think the decline has a bit further to go on a Fed hike and risk assets' fragility. For the moment, we see 0.570 as a bottom, though, with room to bounce back towards 0.59 as early as year-end on some dovish Fed repricing."

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