NZD: Taking flight at last

Research evidence excerpt

NZD: Taking flight at last

arket's attention was elsewhere during most of that time, distracted

by major political events in the US and the global tariff rollout. Once the FX

move belatedly got going though, it snowballed. Encouraged by three RBA

rate hikes in 2026, the cross finally caught up with levels consistent with rate

differentials when AUDNZD climbed above 1.22 (and NZDAUD fell sub-0.82).

The second reason for NZD's indifference, up to now, was the assumption

that upcoming RBNZ rate hikes would be involuntary and harmful — triggered

Source: Bloomberg, Macquarie Macro Strategypurely by events in the Middle East. These would ultimately hurt a domestic

economy that was still reeling from years of slow growth, and would hardly Policy rate cross-over in Nov'24

be a favorable environment in which a risk currency like NZD might prosper.

That assumption is now being challenged. Shortly after hiking rates last

week, Gov Breman's suggestion that green shoots were already visible was

initially greeted with some scepticism. But shortly afterwards the BusinessNZ

Manufacturing PMI showed a sharp and unexpected surge, automatically

boosting the RBNZ's 'nowcast' for Q2 GDP in the process. The next weekly

'nowcast' estimate is due at 0300GMT today, and could help to nudge this

fledgling NZD rally towards its next resistance (the 1.1950 area in AUDNZD,

and 0.8370 area in NZDAUD). After that, NZ Q2 CPI due on 21st July would be

the next test. It seems like only a matter of time before NZD slices through

these levels, as the cross-market rates spread continues to tighten over the

months ahead. So we bring forward, by one quarter, the NZD rebound that

was already embedded in our forecasts, and now see AUDNZD falling to

1.1800 and NZDAUD advancing to 0.8470 by end-Sept.