NZD/USD declined 0.6% after the RBNZ stating that it expects inflation to return to the 1-3% target range in 2H. The RBNZ is also diverging from the RBA, where markets still see a risk of another rate hike due to stubborn inflation, DBS FX & Credit Strategist Chang Wei Liang notes.
A RBNZ rate cut in August increasingly possible
“NZD/USD declined 0.6% after the RBNZ surprised markets by stating that it expects inflation to return to the 1-3% target range in 2H, adding that it could temper monetary restraint with a decline in inflation. Markets are now pricing in a 44% chance of a rate cut in August.”
“The RBNZ is also diverging from the RBA, where markets still see a risk of another rate hike due to stubborn inflation. AUD/NZD has leapt towards 1.11, supported by widening short-term AUD-NZD rate differentials.”
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