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NZD/USD Hits Four-Month Low as RBNZ Signals Deeper Cuts
NZD/USD Hits Four-Month Low as RBNZ Signals Deeper Cuts
David Scutt, FOREX.com APAC Market Analyst, discusses the Reserve Bank of New Zealand’s latest policy move and its impact on markets.
Key Takeaways
- RBNZ cut the cash rate 25bp to 3% and sees a trough at 2.5%
- Markets repriced swaps and the Kiwi dollar dropped below its 200-day average
- Labour market slack and stalled growth underpin the dovish shift
RBNZ Policy Shift
The Reserve Bank of New Zealand delivered a widely expected 25bp cut to 3% but surprised investors with a lower projected trough of 2.5% by early next year. Just months ago, the bank’s forecasts suggested the floor would remain above 3%, highlighting the scale of the change.
Committee Vote Split
The dovish turn was reinforced by two of the six committee members voting for a larger 50bp cut. Keeping rates unchanged was not an option on the table. Scutt notes that the decision reflected concern about stalling growth and weakness across households, employment, and the housing market.
Market Reaction
Markets responded quickly to the new rate path. Short-end rates, including the key two-year swap that anchors most New Zealand mortgages, dropped sharply. The Kiwi 2s10s curve steepened to levels not seen since April, while the currency broke below its 200-day moving average.
Outlook for 2027 and Beyond
The RBNZ does not see tightening resuming until early 2027. Scutt highlights that despite inflation staying near the top of the 1–3% band, the expectation is for spare capacity to bring it back to 2% by mid next year. “It expects spare capacity in the New Zealand economy will bring it back to the 2% midpoint by the middle of next year”.
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---- Written by Frederic Guetin, StoneX TV Producer
---- Expert: David Scutt, FOREX.com APAC Market Analyst
- Currencies
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