Scotiabank’s strategists Shaun Osborne and Eric Theoret highlight the New Zealand Dollar (NZD) as a notable G10 outperformer, supported by a hawkish hold from the Reserve Bank of New Zealand (RBNZ). They note the decision was finely balanced and decided by the Governor’s vote, with forecasts incorporating at least two 25 bp hikes this year due to concerns over broader energy-related inflation, while AUD/NZD has reversed sharply from multi-year highs.

Hawkish hold underpins NZD strength

"The pro-risk, growth-sensitive, and high-beta NZD and SEK are showing notable strength while movement among the remaining G10 currencies remains relatively limited with most trading close to flat vs. the USD."

"The NZD’s gains are fundamentally driven, as market participants reassess their outlook for the RBNZ in the aftermath of the latest policy decision in which a hawkish hold was finely balanced and resolved by the Governor’s decisive vote."

"The RBNZ’s forecast incorporated at least two 25 bp hikes by the end of the year, driven by concerns related to a potential broadening of energy-related inflation."

"The AUD/NZD cross is down significantly, with a 1.2% drop on the day, delivering a clear bearish reversal from a multi-year high following a rally that had climbed to levels last seen in 2013."

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