NZD to weaken against the USD over the short to medium-term – HSBC
19.08.2022, 07:07

NZD to weaken against the USD over the short to medium-term – HSBC

The Reserve Bank of New Zealand (RBNZ) raised its policy rate by 50 bps to 3.00% and signalled further rate hikes over the near term. NZD/USD jumped as much as 0.8% to 0.6383 after the release of the monetary policy statement. However, the knee-jerk move was partly erased by the end of the press conference. Economists at HSBC expect the NZD to weaken against the USD.

RBNZ to shift to 25 bps hikes soon

“We see further downside risk in the NZD for several reasons: i) growing domestic headwinds pose downside risk to the projected OCR path, ii) the NZD stands to benefit less from a hawkish RBNZ as the OCR moves further into restrictive territory and weighs on the economy, and iii) New Zealand is exposed to the risk of an underfunded current account deficit amid a global growth downtrend.”

“At the RBNZ’s next meeting in six weeks (5 October 2022), we expect another rate hike. However, if there are clear signs inflation has peaked and continued downside to the growth outlook, our economists expect the shifting balance of risks to be enough to see a pivot back to normal-sized 25 bps hikes.”

 

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