OCBC’s Sim Moh Siong and Christopher Wong highlight that the New Zealand Dollar (NZD) continues to outperform G10 peers, underpinned by hawkish Reserve Bank of New Zealand (RBNZ) rhetoric and improving domestic activity data. With markets already pricing nearly 90bp of further tightening by mid-2027, they see AUD/NZD biased lower and flag New Zealand’s 2Q26 Consumer Price Index (CPI) release on 21 July as the next key catalyst for NZD performance.

Hawkish RBNZ underpins NZD strength

"The NZD continues to outperform across G10 FX, supported by hawkish RBNZ commentary that has reinforced expectations for further policy tightening. RBNZ Chief Economist Paul Conway recently warned that inflation could prove sticky, increasing the likelihood of additional rate hikes. The central bank began its tightening cycle with a 25bp rate increase to 2.50% on 8 July."

"That said, with markets already pricing almost 90bp of further tightening by mid-2027, the bar for the RBNZ to deliver a materially more hawkish message is high. A renewed rise in energy prices also remains a key downside risk for the NZD given New Zealand's status as a net oil importer."

"Even so, the RBNZ has shown little inclination to push back against current market pricing, while recent activity indicators suggest the economy is beginning to recover. These domestic tailwinds should continue to support the NZD, reinforcing our view that AUD/NZD has likely peaked and remains biased lower. The next major catalyst for the NZD will be New Zealand's 2Q26 CPI release on 21 July."

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