RBNZ Focus Remains on Inflation Amid NZ GDP Slowdown

New Zealand's second-quarter GDP data is set to be released overnight, with expectations of a slowdown from 0.8% in the first quarter to just 0.1%. While this figure will have some impact on market expectations, it plays a secondary role for the Reserve Bank of New Zealand (RBNZ), which remains focused on inflation and jobs.

The RBNZ has indicated that there is only room for another 25 basis point hike to reach its target rate of 3.0%, but this does not necessarily mean that no further hikes will occur. With energy prices remaining elevated, the chances of upward revisions in policy projections by year-end are increasing.

The market currently prices in around a 65% probability of an October interest rate hike, with the next and final hike expected in December. However, the NZD/USD currency pair remains primarily driven by global risk sentiment and US events.