RBNZ Survey Threatens to Break NZD/USD Calm
The New Zealand dollar has been remarkably quiet in August, but its calm may be living on borrowed time. Volatility is sitting near two-decade lows, and Kiwi rates markets are heavily priced for further Reserve Bank of New Zealand (RBNZ) tightening.
The RBNZ's Survey of Expectations is a crucial release today, with two-year inflation expectations being the key number to watch. A meaningful deviation from the current 2.53% could jolt the Kiwi out of its funk and force traders to rethink the aggressive tightening path.
Markets have priced in a relatively steep monetary policy tightening cycle from the RBNZ, with an implied probability of a hike at the September meeting at 88%. However, if two-year inflation expectations fall back towards the RBNZ's 2% target midpoint, it could prove far more meaningful for Kiwi rates and currency.