Key Moments
- MUFG’s Derek Halpenny expects the RBNZ to keep rates unchanged while signaling a more hawkish outlook with higher inflation and OCR projections.
- Guidance indicating two to three rate hikes this year is viewed as plausible and broadly in line with roughly 70 bps already priced in by markets.
- Reduced NZD leveraged fund shorts and a potential weakening of the USD on a US-Iran peace deal are seen as additional supports for NZD momentum.
RBNZ Policy Outlook and Market Expectations
MUFG’s Derek Halpenny anticipates that the Reserve Bank of New Zealand will keep its policy rate steady while pairing that decision with a distinctly hawkish policy statement. He expects updated projections to point to stronger inflation and a higher path for the Official Cash Rate (OCR) for both this year and next.
According to Halpenny, a policy message that indicates between two and three rate increases over the year would align with prevailing market expectations and could underpin the New Zealand Dollar (NZD). He highlights that this level of guidance would be broadly consistent with around 70 bps of tightening currently reflected in pricing.
RBNZ Communication and Inflation Risk
Halpenny notes that the central bank has previously reacted forcefully when confronted with inflation risks, and he expects that pattern to continue.
“This RBNZ tomorrow will also release updated forecasts that will show higher inflation and a higher projected OCR rate for this year and next.”
“The RBNZ does have a recent history of responding aggressively to inflation risks and we expect to see another hawkish message tomorrow that will help validate current market pricing.”
Interaction with Global Developments and Market Sentiment
Halpenny also links the NZD outlook to broader macro and geopolitical factors. He points out that some of the recent weaker data have largely reflected sentiment-driven indicators. In his view, those could improve if a peace agreement between the US and Iran is reached, which could in turn weigh on the US Dollar (USD).
“Given the bad data readings were mostly sentiment indicators that could turn around on a peace deal being reached, a signal of between two and three rate hikes this year from the RBNZ seems plausible.”
“With around 70bps priced that would be broadly consistent with market pricing that should help support NZD positive momentum if the US dollar weakens back on a peace deal being reached between the US and Iran.”
Positioning in NZD Leveraged Funds
Speculative positioning is another factor Halpenny highlights in support of the NZD. He notes that leveraged funds have recently reduced their short exposure to the currency.
“NZD Leveraged Funds’ short position was pared to the week to last Tuesday after reaching the largest short since December 2019.”
Summary of Key RBNZ-Related Market Metrics
| Factor | Details |
|---|---|
| Policy rate decision expectation | Rates left unchanged |
| RBNZ communication bias | Hawkish, with higher inflation and OCR projections |
| Implied rate hikes | Signal of between two and three hikes seen as plausible |
| Market pricing | Around 70 bps of tightening priced in |
| NZD leveraged funds positioning | Shorts pared after reaching the largest level since December 2019 |
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
