The RBNZ will announce its interest rate decision during the New Zealand trading day (10:00 PM ET / 2:00 PM NZT Wednesday). While the consensus leans toward a 25 basis point hike, the outcome is far from certain.
Most economists view the decision as a genuine coin flip between leaving the Official Cash Rate unchanged at 2.25% and delivering a 25 basis point “insurance” hike to 2.50%.
Recall that the May meeting ended in a 3-3 split, with Governor Breman casting the deciding vote to keep rates unchanged. At that meeting, the RBNZ’s projections pointed to 50-75 basis points of additional tightening by the end of 2026. However, the case for another hike has weakened since then. Those forecasts assumed oil prices would remain in the $95-$105 per barrel range, while crude has since fallen to around $65 following the U.S.-Iran peace agreement, easing one of the central bank’s key inflation concerns.
Economists remain divided. Bloomberg’s survey consensus favors a 25 basis point increase, with ING and BNY arguing that another hike is needed to keep inflation expectations anchored amid still-solid wage growth and a tight labor market. In contrast, Westpac expects the RBNZ to remain on hold—possibly with a unanimous decision—and most major New Zealand bank economists believe the tightening cycle will resume in September instead.
Market pricing reflects the uncertainty, with swaps implying only about 18 basis points of tightening for this meeting. As a result, a decision to hold rates could trigger a meaningful dovish repricing in the New Zealand dollar. Even so, the accompanying statement and Governor Breman’s press conference may ultimately prove more important for markets than the rate decision itself.
From a technical perspective, the NZDUSD initially rallied following the May 27 RBNZ meeting, reaching a high of 0.5993 on May 29. That move briefly exceeded the May 6 high of 0.59898 by just four pips before running out of momentum and reversing lower.
The reversal coincided with a dramatic shift in the oil market. Crude traded near $88 per barrel on May 29, briefly climbed toward $97 by June 3, and then collapsed to a low of $67.04 on June 26. As energy prices fell, traders began to scale back expectations for additional RBNZ tightening, weighing on the New Zealand dollar.
Since bottoming, NZDUSD has staged a corrective rebound, reaching 0.5726 before turning lower again. That high extended just above the 38.2% retracement of the decline from the June 15 high, which comes in at 0.5716. Those levels—0.5716 to 0.5726—now represent an important upside resistance zone that buyers will need to clear if the RBNZ delivers a hawkish surprise. The 50% midpoint and 0.5744 would be the next upside target followed by the 61.8% retracement near 0.5772.
On the downside, recent selling has pushed the pair back below its rising 100-hour moving average, currently at 0.5692, while the price continues to hold above the 200-hour moving average at 0.5672. A move below both moving averages would shift the short-term technical bias firmly back in favor of the sellers and increase the risk of a retest of the June 26 low at 0.56253.
The daily chart reinforces the importance of the downside support on the hourly chart. A key swing area comes in between 0.5677 and 0.5691. With the 200-hour moving average sitting just below at 0.5672, a sustained break beneath both the swing area and the 200-hour moving average would strengthen the bearish case on both the hourly and daily charts (see the red numbered circles and yellow highlighted area on the chart below). Conversely, if buyers can defend that support zone, the broader corrective recovery would remain intact.
This article was written by Greg Michalowski at investinglive.com.
