New Zealand Dollar: RBNZ pause limits Kiwi gains – Commerzbank

FXStreet Insights Team FXStreet

Commerzbank’s Norman Liebke notes that the Reserve Bank of New Zealand (RBNZ) surprised markets by holding at 2.75%, even as it signalled further hikes will likely be needed. He sees limited medium-term upside for New Zealand Dollar (NZD), arguing market pricing of around four hikes by next September is too hawkish and expecting the Kiwi to weaken as expectations are pared back.

Hawkish pricing seen as excessive

"The Reserve Bank of New Zealand left its policy rate unchanged at 2.75%, contrary to market expectations, an outcome that my colleague Volkmar had cautiously anticipated in his latest strategic currency briefing. The decision was as close as it can get, with a 4-3 vote."

"Nevertheless, inflationary pressures remain high. After the inflation rate edged down from 4.1% to 3.7% in the third quarter, the RBNZ expects it to rise again to 4.4% in the fourth quarter. Higher fuel prices and the weaker NZD are adding to price pressures. Accordingly, despite pausing at this meeting, the RBNZ made it clear that further rate hikes are likely to be necessary from today’s perspective."

"The Kiwi temporarily fell by 1.6% against the USD to almost 0.56. Over the medium term, however, we do not see much upside for the NZD either, given what we consider overly hawkish market expectations. Although there was no rate hike at this meeting, the market is pricing in around four 25-basis-point hikes by September next year and appears to have interpreted the RBNZ’s communication as signalling a postponement of rate hikes rather than fewer hikes overall."

"While we continue to expect a rate hike in December, we are more sceptical than the market about the medium-term outlook. As rate-hike expectations are pared back, the Kiwi is therefore likely to weaken. At the same time, we also consider current expectations for the Fed to be too hawkish, which should limit the extent of any NZD depreciation."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD jumps to 0.7050, fresh one-month top after hot Australian CPI

AUD/USD attracts buyers for the second straight day on Wednesday, rising to a fresh high since September 23 during the Asian session. A hot Australian CPI print reaffirmed bets for an imminent RBA rate hike in November and boosted the Australian Dollar. Meanwhile, the US Dollar pauses after a three-day rally to a near two-week high ahead of the crucial FOMC rate decision, lending additional support to the currency pair.

USD/JPY sticks to modest gains above 157.50 as traders await Fed, BoJ meetings

USD/JPY attracts buyers for the third straight day, recovering further from a one-month low ahead of Wednesday’s FOMC decision and the BoJ policy update on Friday. Meanwhile, expectations that the BoJ may hold off on aggressive rate hikes weigh on the Japanese Yen, and the US Dollar advances to a nearly two-week high, supporting the currency pair.

Gold extends pullback from weekly top, further below $4,050 as focus remains on FOMC

Gold extends its retracement slide from the weekly high touched during the Asian session, falling further below $4,050 heading into the European session and ahead of the key central bank event. The US Federal Reserve is scheduled to announce its policy decision later today and is widely expected to keep rates unchanged. Hence, the focus will be on the accompanying policy statement and Fed Chair Kevin Warsh's comments during the post-meeting press conference.

Zcash's bullish momentum mounts on steady ETF inflows, retail confidence

Zcash extends steady recovery above $1,300 on Wednesday, approaching a key resistance near $1,373. Grayscale’s ZEC-focused Exchange-Traded Fund sees persistent buying pressure, with six straight days of inflows, including more than $3 million on Tuesday.

FOMC outlook: Why keeping rates unchanged might not be enough

Tomorrow's FOMC meeting could be quite interesting, even if the Federal Reserve decides to leave interest rates unchanged. According to the latest market expectations, there is currently a 92.8% probability that rates will remain at 3.75–4.00%, while the probability of another 25 basis point increase stands at just 7.2%.

Anthropic pledged $270 billion to Amazon, Google, and Microsoft. Here's who actually gets paid

Anthropic owes Amazon, Google, and Microsoft at least $269.4 billion for computing power, even if it uses less. All three sell its models and handle its billing, and Amazon and Google own stakes and lend it money, so they get paid regardless of how the IPO goes. The Dario Amodei-led Anthropic filed its initial public offering (IPO) on Monday, seeking a listing on the Nasdaq under the ticker ANT.