RBNZ Hawkish Tone Drives New Zealand Dollar Higher

The New Zealand Dollar (NZD) gained strength overnight due to hawkish guidance from Reserve Bank of New Zealand (RBNZ) Governor Breman. He indicated that higher oil prices would result in slightly higher near-term inflation than previously assumed, reinforcing expectations for a third consecutive 25 bps rate hike next month.

Stronger-than-expected growth of 0.2% in Q2 and markets pricing over 100 bps of tightening by next summer underpin the kiwi's firmer tone.

The New Zealand rate market is now pricing in around 18bps of hikes for next month, while just over 100bps of hikes are expected by next summer.