Pesole Expects NZ Labour Data to Support RBNZ Hikes in September

ING's Francesco Pesole believes that New Zealand's Q2 labour data will match the Reserve Bank of New Zealand's May projections, which suggested one to two hikes in Q3. This would support a hike in September or October, with rising conviction for September. The labour market data is expected to show 0.1% QoQ employment growth and an unemployment rate of 5.4%, matching the Reserve Bank's expectations.

Pesole thinks that markets may be overstating the scale of the tightening cycle, pricing in 75bp by February. However, if two of the six policy committee members are not fully aligned with the hawkish shift, a smaller 50bp 'insurance' tightening cycle is possible, which would argue for an earlier move in September.

NZD has been strong since the Fed meeting, outperforming AUD after it suffered a sharp dovish repricing following a soft CPI release. A September hike delivered with a slightly dovish tone could prompt some correction and open the door to a period of AUD outperformance relative to NZD.