NZD/USD Rises on Inflation Uncertainty, RBNZ Rate Decision Watch

New Zealand Dollar Stages a Comeback as Inflation Data Looms

After a challenging week marked by persistent losses, the New Zealand dollar has demonstrated resilience, staging a rebound on Friday. In early European trading,the kiwi was trading at 0.5978, marking a notable 0.80% increase for the day. This recovery follows a tough July for the currency, which has seen a cumulative decline of 2.2% and hit a low of 0.5904 on Thursday, it’s weakest point since June 23rd.

Market attention now squarely focuses on New Zealand’s upcoming inflation report for the second quarter, scheduled for release early Monday. Analysts anticipate that the annual inflation rate will tick upwards to 2.8% year-on-year, a rise from the 2.4% recorded in the first quarter and the highest inflation rate seen since June 2024. On a quarterly basis,the Consumer Price Index (CPI) is projected to moderate slightly to 0.6%, down from the 0.9% registered in Q1.

It’s worth noting that even when Q1 inflation data came in higher then expected, it did not prevent the Reserve Bank of New Zealand (RBNZ) from implementing a rate cut. The central bank trimmed its policy rate by a quarter-point in May. this precedent suggests that even if Monday’s inflation figures surprise on the upside,the RBNZ might still opt for another rate cut at its upcoming meeting on August 20th.

The RBNZ previously held interest rates steady on July 9th, a decision that was widely anticipated. The bank has demonstrated a willingness to act decisively,having reduced rates by a significant 225 basis points since August 2024. However, to effectively chart its future rate path, the RBNZ is likely seeking greater clarity regarding global tariff developments.

The domestic economy could certainly benefit from the stimulus of a rate cut, especially as ongoing global trade tensions cast a shadow over business and consumer confidence. With U.S. President Trump having signaled potential new tariffs on China, South Korea, and Japan in August, New Zealand’s economy faces headwinds. These nations are among New Zealand’s largest trading partners, and any escalation in trade disputes could have tangible negative impacts.

NZD/USD Technical Outlook

Technically, the NZD/USD pair has successfully broken through the resistance level at 0.5957 and is currently testing the 0.5983 mark. Further resistance lies ahead at 0.6009.

on the downside, immediate support is identified at 0.5931, with a subsequent support level found at 0.5905.

Is the current level of core inflation in New Zealand likely to prompt the RBNZ to adopt a more hawkish monetary policy stance?<

Recent NZD/USD Performance & Key Drivers

The NZD/USD pair has experienced upward momentum recently, driven primarily by fluctuating inflation expectations and heightened anticipation surrounding the next Reserve Bank of New Zealand (RBNZ) monetary policy decision.As of July 18, 2025, the pair is trading at[InsertCurrentexchangeRateHere-[InsertCurrentexchangeRateHere-research and populate], representing a[InsertPercentageChangeHere-[InsertPercentageChangeHere-research and populate]increase over the past[InsertTimeframeHere-[InsertTimeframeHere-research and populate]. This movement reflects a complex interplay of domestic economic data and global risk sentiment.

Several factors are contributing to this dynamic:

New Zealand Inflation Data: Recent inflation figures have presented a mixed picture, creating uncertainty about the RBNZ’s next move. While headline inflation has shown signs of cooling, core inflation remains stubbornly high, prompting speculation about further tightening of monetary policy.

US Dollar Weakness: A generally weaker US dollar,influenced by[mentionspecificUSeconomicfactors-[mentionspecificUSeconomicfactors-research and populate],has provided additional support for the NZD/USD pair.

Commodity Price Fluctuations: New Zealand’s economy is heavily reliant on commodity exports, notably dairy. Changes in global commodity prices directly impact the New zealand dollar’s value.

Global Risk Appetite: Shifts in global risk appetite, often linked to geopolitical events or economic slowdowns in major economies, can influence demand for the New Zealand dollar as a risk-on or risk-off currency.

Decoding the Inflation Puzzle in New Zealand

Understanding the nuances of New Zealand’s inflation landscape is crucial for predicting the NZD/USD’s trajectory. The current situation is characterized by:

Headline vs.Core Inflation: Headline inflation, which includes volatile items like fuel and food, has been moderating. Though, core inflation, which excludes these items, remains elevated, indicating underlying inflationary pressures.

Wage Growth: Strong wage growth is contributing to persistent inflation, as businesses pass on increased labor costs to consumers.

Supply Chain Issues: While easing, lingering supply chain disruptions continue to contribute to price increases for certain goods.

Housing Market Impact: The cooling housing market is providing some relief to inflationary pressures, but its impact is limited.

These factors are forcing the RBNZ to carefully weigh the risks of overtightening (perhaps triggering a recession) against the risks of undertightening (allowing inflation to become entrenched).

RBNZ Rate Decision: What to Expect?

The next RBNZ monetary policy meeting,scheduled for[InsertdateHere-[InsertdateHere-research and populate],is a pivotal event for the NZD/USD. Market participants are currently pricing in a[InsertProbabilityHere-[InsertProbabilityHere-research and populate]probability of a[InsertRateHike/Hold/CutHere-[InsertRateHike/Hold/CutHere-research and populate].

Here’s a breakdown of potential scenarios:

1. Rate Hike (25 bps): A 25 basis point rate hike would likely strengthen the NZD/USD, signaling the RBNZ’s commitment to tackling inflation. This scenario is more probable if upcoming economic data confirms persistent core inflation.
2. rate Hold: A decision to hold rates steady would likely lead to a moderate decline in the NZD/USD,as it suggests the RBNZ is becoming more cautious about the economic outlook.
3. Rate Cut (Unlikely): A rate cut is currently considered highly unlikely, given the prevailing inflationary environment.Though, a significant deterioration in economic conditions could prompt the RBNZ to reconsider its stance.

Key Metrics the RBNZ will Be Watching:

Consumer Price Index (CPI): The latest CPI data will be a critical input for the RBNZ’s decision.

Labor Market Data: Employment figures and wage growth will provide insights into the strength of the economy and inflationary pressures.

Business Confidence Surveys: These surveys offer a gauge of business sentiment and investment intentions.

global Economic Conditions: The RBNZ will also consider the global economic outlook and its potential impact on New zealand.

Technical Analysis: NZD/USD Levels to watch

From a technical viewpoint, the NZD/USD pair is currently facing resistance at[InsertResistanceLevelHere-[InsertResistanceLevelHere-research and populate].A break above this level could signal further upside potential, with the next target at[InsertNextResistanceLevelHere-[InsertNextResistanceLevelHere-research and populate].

Conversely, support is seen at[InsertSupportLevelHere-[InsertSupportLevelHere-research and populate]. A breach of this level could lead to a test of[InsertNextSupportLevelHere-[InsertNextSupportLevelHere-research and populate].

Key Technical Indicators:

Moving Averages: The 50-day and 200-day moving averages are currently[DescribeRelationship-[DescribeRelationship-research and populate],suggesting[Interpretation-[Interpretation-research and populate].

Relative Strength Index (RSI): The RSI is currently at[InsertRSIValueHere-[InsertRSIValueHere-research and populate], indicating[Interpretation-[Interpretation-research and populate].

MACD: The MACD is showing[DescribeMACDSignal-[DescribeMACDSignal-research and populate*].

implications for Traders &