ING Predicts September Hike for New Zealand as Labour Data Looms

ING's Francesco Pesole expects New Zealand's Q2 labour data to match the Reserve Bank of New Zealand's May projections, which implied one to two hikes in Q3. He favors a hike in September or October, with rising conviction for September.

The Reserve Bank of New Zealand projected employment growth of 0.1% quarter-over-quarter and an unemployment rate of 5.4%. These numbers would align with the bank's expectations, implying one to two hikes in Q3.

Pesole believes markets may be overstating the scale of tightening, pricing around 75bp by February. He suspects only two of the six policy committee members fully aligned with the May hawkish shift, leading him to think a smaller 'insurance' tightening cycle is more likely.

NZD has outpaced AUD since the Fed meeting, and ING sees it holding near 0.585-0.590 for now. However, if the Reserve Bank hikes in September with a slightly dovish tone, this could prompt some correction and open the door to AUD outperformance relative to NZD.

Pesole's year-end target for NZD/USD is 0.59, but 0.60 becomes increasingly attainable.