New Zealand Dollar Rallies as RBNZ Nears Rate Hike

New Zealand Dollar Rallies on RBNZ Hawkish Stance

The New Zealand dollar bounced on Wednesday after the Reserve Bank of New Zealand unexpectedly came close to hiking interest rates. The RBNZ kept the official cash rate at 2.25% as expected, but the six-member board split down the middle on whether to hike, a surprisingly close call.

RBNZ Signals Tightening

The board warned that rates would likely need to increase sooner and by more than previously envisaged due to rising energy costs posing upside risks to inflation. Markets quickly priced in a 75% probability of a quarter-point hike in July and expect rates to reach 3.0% by year-end.

The kiwi dollar rose 0.6% to $0.5869, reversing a similar pullback. Resistance stands at $0.5887, while support at $0.5816.

Australian Data and AUD Impact

Australian monthly CPI rose 0.4% in April, below forecasts of 0.6%. The annual pace slowed to 4.2% from 4.6%, partly due to a government tax break on petrol. However, the trimmed mean core inflation rose 0.3% as expected, with the annual pace accelerating to 3.4%, the fastest since Q3 2024.

The Australian dollar dipped 0.1% to $0.7157. Investors see a 60% chance of a rate hike by September, with a peak of 4.60% this cycle.