Commerzbank’s Volkmar Baur reports that the Reserve Bank of New Zealand (RBNZ) left rates unchanged, but Governor Breman’s comments about discussing a hike were read as slightly hawkish, supporting the New Zealand Dollar (NZD) against the US Dollar (USD). However, he stresses downside economic risks, sees nearly three hikes priced by year-end as excessive, and does not expect sustained tailwind for the Kiwi.

RBNZ holds as markets price hikes

"As expected, the RBNZ left its key interest rate unchanged today."

"However, foreign exchange markets appeared to interpret the comments as somewhat more hawkish than initially anticipated."

"As of today, the futures market is pricing in nearly three interest rate hikes by year-end."

"While developments in the Gulf region are overshadowing much of the market activity this morning, the kiwi still seems to be gaining ground against the US dollar more strongly than other currencies."

"The communiqué from the meeting also mentions that there is a very real risk that the economy could suffer a significant setback, and that this alone would reduce the medium-term inflationary effects."

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