NZD/USD’s post-RBNZ rally finds resistance above 0.5690

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The New Zealand Dollar trims gains against the USD and eases below 0.5670.
The Kiwi rallied across the board following the RBNZ's "hawkish cut".
US Durable Goods Orders and Initial Jobless Claims might add pressure on the USD later today.

The New Zealand Dollar is trading higher against its US counterpart on Wednesday, boosted by a “hawkish cut” by the Reserve Bank of New Zealand RBNZ) and heightened hopes that the US Federal Reserve will cut rates in December. The pair’s rally, however, met resistance at the 0.5690 area before pulling back to levels sub-0.5670.,

The RBNZ cut its OCR rate by 25 basis points to a three-year low of 2.25%, as widely expected on Wednesday, but signalled the end of the easing cycle, as New Zealand’s economy starts to show signs of recovery.

The central bank’s monetary policy statement stated that further rate cuts will depend on the evolution of the medium-term inflation and on the economic prospects. The bank also projected the cash rate to be at 2.20% in the first quarter of 2026 and at 2.65% in adt the end of 2027

Fed cut hopes are weighing on the USD

The Kiwi dollar rallied across the board, following the monetary policy decision, appreciating a maximum of 1.4% against the US Dollar, before trimming some gains during the European trading session.

The Greenback, in turn, remains on the defensive, following a batch of downbeat US macroeconomic releases. September’s delayed US Retail Sales report disappointed, while producer prices remained steady, and consumer confidence deteriorated, with households wary about the higher prices and the worsening job prospects.

Wednesday’s figures add to evidence that the US economy is going through a soft patch and make a case for further Fed rate cuts in December. Later today, the US Durable Goods Orders, an advanced indicator of manufacturing activity, is expected to show a slowdown in September, while jobless claims are expected to rise. Not the best news for the US Dollar.

RBNZ FAQs

What is the Reserve Bank of New Zealand?

The Reserve Bank of New Zealand (RBNZ) is the country’s central bank. Its economic objectives are achieving and maintaining price stability – achieved when inflation, measured by the Consumer Price Index (CPI), falls within the band of between 1% and 3% – and supporting maximum sustainable employment.

How does the Reserve Bank of New Zealand’s monetary policy influence the New Zealand Dollar?

The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC) decides the appropriate level of the Official Cash Rate (OCR) according to its objectives. When inflation is above target, the bank will attempt to tame it by raising its key OCR, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the New Zealand Dollar (NZD) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken NZD.

Why does the Reserve Bank of New Zealand care about employment?

Employment is important for the Reserve Bank of New Zealand (RBNZ) because a tight labor market can fuel inflation. The RBNZ’s goal of “maximum sustainable employment” is defined as the highest use of labor resources that can be sustained over time without creating an acceleration in inflation. “When employment is at its maximum sustainable level, there will be low and stable inflation. However, if employment is above the maximum sustainable level for too long, it will eventually cause prices to rise more and more quickly, requiring the MPC to raise interest rates to keep inflation under control,” the bank says.

What is Quantitative Easing (QE)?

In extreme situations, the Reserve Bank of New Zealand (RBNZ) can enact a monetary policy tool called Quantitative Easing. QE is the process by which the RBNZ prints local currency and uses it to buy assets – usually government or corporate bonds – from banks and other financial institutions with the aim to increase the domestic money supply and spur economic activity. QE usually results in a weaker New Zealand Dollar (NZD). QE is a last resort when simply lowering interest rates is unlikely to achieve the objectives of the central bank. The RBNZ used it during the Covid-19 pandemic.