Kiwi Slides as Commodities, RBNZ Outlook Weigh

Key Moments

NZD/USD trades around 0.5680, down 0.50% as the New Zealand Dollar faces pressure from weaker commodity prices and a firmer US Dollar.
A 1% fall in the ANZ Commodity Price index in June and split views on the Reserve Bank of New Zealand’s July decision heighten uncertainty.
Analysts at ANZ and BNY expect a 25-basis-point RBNZ hike to 2.5%, while markets also price multiple Federal Reserve rate increases this year.

NZD Under Pressure as Commodity Prices Ease

NZD/USD is trading near 0.5680, marking a decline of 0.50% on the day as the New Zealand Dollar (NZD) struggles against a stronger US Dollar (USD). The currency is being undermined by a 1% drop in the ANZ Commodity Price index in June, reflecting the impact of reduced tensions in the Middle East and lower Oil prices on New Zealand’s key export commodities.

RBNZ July Meeting in Focus Amid Divided Views

Attention is now turning to the upcoming policy decision from the Reserve Bank of New Zealand (RBNZ). The New Zealand Institute of Economic Research (NZIER) shadow board is almost evenly divided on the likely outcome of the July meeting, underscoring a high degree of short-term uncertainty that could amplify volatility in the New Zealand Dollar.

Despite these differing near-term views, NZIER economists generally concur that the Official Cash Rate (OCR) should move up to a range of 3% to 3.25% over the next twelve months.

Analyst Expectations for OCR Path

ANZ is aligned with this broader outlook and anticipates that the RBNZ will lift the OCR by 25 basis points to 2.5% next week. The bank argues that persistent inflation pressures and the softness of the domestic currency warrant further tightening, even after the recent drop in Oil prices.

BNY also retains a hawkish stance, projecting that the RBNZ will deliver a 25-basis-point increase to 2.5%. Its view is supported by stronger Gross Domestic Product (GDP) growth, a firm labor market and inflation remaining close to the upper bound of the central bank’s target range. BNY expects markets to pay particular attention to the RBNZ’s forward guidance and whether it maintains a hawkish bias, keeping expectations intact for the OCR to reach around 3% by early 2027.

US Dollar Supported by Fed Hike Expectations

The US Dollar is drawing backing as markets continue to price in multiple Federal Reserve (Fed) rate hikes by the end of the year. Investors are awaiting the release of the Fed’s June Meeting Minutes on Wednesday, along with the Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI) due later in the day, for additional insight into the Fed’s future policy trajectory.

Comments from Iran’s ambassador to China about potential new transit fees through the Strait of Hormuz are also contributing to a cautious tone in broader markets.

New Zealand Dollar Performance Against Major Currencies

The table below shows the current day’s percentage change of the New Zealand Dollar (NZD) versus major counterparts. Over this period, the New Zealand Dollar has been strongest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.15%	0.08%	0.55%	0.20%	0.11%	0.48%	0.23%
EUR	-0.15%		-0.06%	0.41%	0.06%	-0.01%	0.34%	0.09%
GBP	-0.08%	0.06%		0.48%	0.09%	-0.01%	0.41%	0.16%
JPY	-0.55%	-0.41%	-0.48%		-0.36%	-0.44%	-0.09%	-0.26%
CAD	-0.20%	-0.06%	-0.09%	0.36%		-0.10%	0.29%	0.06%
AUD	-0.11%	0.01%	0.00%	0.44%	0.10%		0.40%	0.15%
NZD	-0.48%	-0.34%	-0.41%	0.09%	-0.29%	-0.40%		-0.25%
CHF	-0.23%	-0.09%	-0.16%	0.26%	-0.06%	-0.15%	0.25%

The heat map shows percentage changes of major currencies relative to one another. The base currency is taken from the left-hand column and the quote currency from the top row. For example, selecting the New Zealand Dollar from the left column and moving horizontally to the US Dollar cell displays the percentage move for NZD (base)/USD (quote).