Goldman Sachs Sees AUD/NZD Decline as NZ Inflation Revives Rate-Hike Expectations

Goldman Sachs is revising its forecast for the Australian Dollar (AUD) to New Zealand Dollar (NZD) exchange rate, expecting it to decline over the medium term. The bank's analysts point to stronger-than-expected inflation data in New Zealand as a key driver of this change.

New Zealand's consumer prices rose 1.5% quarter-on-quarter and annual inflation accelerated to 4.1%, leading Goldman Sachs to expect the Reserve Bank of New Zealand (RBNZ) to raise interest rates in September, followed by a final increase in December. This would take the Official Cash Rate to 3.00%, making it more likely that the NZD will strengthen against its Australian counterpart.

The shift in RBNZ expectations challenges the recent narrative of a widening contrast between expectations for Australian and New Zealand monetary policy, which has contributed to the AUD/NZD cross's strength. Goldman Sachs still expects higher energy prices to support the cross in the near term, but it believes that the renewed RBNZ tightening cycle will become increasingly important over the medium term.