NZD Struggles Despite Hawkish RBNZ Expectations
The New Zealand Dollar (NZD) is struggling despite growing expectations of interest rate hikes from the Reserve Bank of New Zealand (RBNZ).
A recent strong inflation data release, which showed a 1.5% rise in consumer prices in the second quarter and annual inflation at 4.1%, has strengthened expectations that the RBNZ will raise interest rates again in September.
However, oil price volatility is offsetting these expectations, with Brent crude falling to around $86.70 on Tuesday from above $100 last week. This has reduced the relative advantage for the NZD and supported the US Dollar, particularly as Middle East tensions have periodically weakened global risk appetite.
Bank of New Zealand (BNZ) remains neutral on the NZD/USD exchange rate, forecasting it to remain near the midpoint of its Q3 range of 0.56-0.60. The bank expects some consolidation in the week ahead, with the upcoming Fed decision and US GDP and inflation data due to be released.