NZD Surges as Markets Price in Third Rate Hike by RBNZ

The New Zealand Dollar (NZD) has gained momentum in recent days, driven by growing expectations of further monetary tightening by the Reserve Bank of New Zealand. Markets are currently pricing in an 87% chance of a third rate hike in October, up from just 20% earlier this month.

RBNZ Governor Anna Breman's warning that sustained oil price hikes could drive near-term inflation past the central bank's recent projections has contributed to this shift in market expectations. Strategists at Brown Brothers Harriman note that the NZD is 'outperforming most major currencies' after Breman's more hawkish tone.

The US Dollar, meanwhile, has ticked slightly lower, even amid persistent hawkish sentiment surrounding the Federal Reserve. Despite this, underlying strength remains anchored by recent Flash US S&P Global PMI data for September, which revealed faster-than-expected growth in manufacturing at 52.0.