RBNZ Hike Seen with Dovish Risks for NZD

ING's Francesco Pesole forecasts that the Reserve Bank of New Zealand will increase interest rates by 25 basis points to 2.75% tomorrow morning, in line with market expectations and a unanimous consensus among analysts.

The impact on the New Zealand dollar (NZD) will depend on whether the RBNZ includes firmly hawkish guidance in its statement, as well as updated rate and economic projections.

Pesole believes that current market pricing for further tightening appears too aggressive, with markets fully pricing in a 25 basis point hike. He expects the RBNZ to revise down its CPI (Consumer Price Index) projections due to softer oil prices, which would lead to a decline in the NZD/USD exchange rate below 0.5900.

The Reserve Bank of New Zealand's decision tomorrow morning will be crucial for determining the direction of the NZD.