Dollar Rises on Warsh's Hawkish Comments as NZ RBNZ Decision Looms

The US dollar strengthened across the board on Friday after Federal Reserve Chair Jerome Warsh delivered a hawkish speech at the Jackson Hole Symposium, saying that broad financial conditions are not restrictive.

This interpretation led to the market retightening financial conditions, extending corrections in 'debasement' trades and sending the US dollar back to pre-US Treasury announcement levels.

The rate hike probabilities for the September meeting have increased, with a 60% chance of a hike. Only a soft US CPI report could bring these probabilities below 50%, deterring the Fed from hiking at the upcoming meeting.

In contrast, the Reserve Bank of New Zealand (RBNZ) is widely expected to raise its Overnight Cash Rate by 25 basis points to 2.75%, in line with its projections for 2026. However, market pricing sees two more rate hikes to come in 2027, creating a downside risk for the kiwi if the RBNZ fails to match or outdo these expectations.