NZD Poised for Hike as Labour Data Expected to Align with RBNZ Projections

New Zealand's labour market data for Q2 is expected to match the Reserve Bank of New Zealand's (RBNZ) May projections, implying one to two hikes in Q3. ING's Francesco Pesole expects this outcome and sees NZD/USD holding near 0.585-0.590.

Pesole favours a hike in September or October, with rising conviction for September. He believes the RBNZ may be understating the scale of the tightening cycle, potentially leading to an earlier move in September followed by a pause.

Since July's hike, markets have continued to price around 20-25bp of tightening for the 2 September meeting. Pesole suspects that two of the six policy committee members were not fully aligned with May's hawkish shift, supporting his view.