DBS Group Research economist Philip Wee expects the Reserve Bank of New Zealand (RBNZ) to deliver a hawkish hold, prioritising above-target inflation over weak GDP growth and high unemployment. He notes that OIS markets price a 51.5% chance of a July hike, while DBS does not rule out an early move at the May meeting, which could help lift NZD/USD back toward the upper half of its 0.57–0.61 trading range.

RBNZ stance underpins New Zealand Dollar

“The Reserve Bank of New Zealand is widely expected to deliver a hawkish hold during its monetary policy meeting on May 27.”

“However, the RBNZ is likely to prioritise above-target inflation over weak GDP growth and high unemployment.”

“Despite the consensus for the Official Cash Rate to stay unchanged at 2.25%, the OIS market is pricing a 51.5% chance of a 25-bps hike at the July 8 meeting.”

“We cannot rule out the RBNZ surprising with an “early” hike tomorrow.”

“Hence, NZD/USD has the potential to return to the upper half of this year’s trading range of 0.57-0.61, especially if the USD sheds its haven status amid any US-Iran deal to reopen the Strait of Hormuz.”

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