New Zealand Dollar: RBNZ tightening cycle underpins Kiwi – HSBC

HSBC strategists see NZD/USD supported by New Zealand’s strengthening growth data and an aggressive Reserve Bank of New Zealand (RBNZ) hiking path. The RBNZ has begun raising rates and HSBC Economics projects 25bp hikes per quarter to 3.50% by Q3 2027. The stance is viewed as NZD-positive, though the currency’s high sensitivity to global growth and Middle East-related risks is highlighted.

Kiwi buoyed by policy but growth risks

"New Zealand’s growth upswing appears to be gaining traction, with retail sales rebounding, consumer sentiment improving and the PMI rising to 59.7 in June."

"The Reserve Bank of New Zealand (RBNZ) delivered its first hike in July, lifting its cash rate by 25bp to 2.50%."

"HSBC Economics expects 25bp of tightening per quarter, taking the cash rate to 3.50% in Q3 2027, while markets are pricing a faster path."

"We see the RBNZ’s stance as NZD-positive: it is priced to hike the most in G10 over the next year yet remains comfortably below the upper end of estimates for the neutral rate."

"Key risks stem from NZD’s high sensitivity to global growth, particularly if spillovers from the Middle East conflict weigh on activity, an exposure amplified by New Zealand’s high oil-to-GDP intensity among G10 net energy importers."

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