NZD/USD extends its losing streak for the fifth successive day, trading around 0.5810 during the European hours on Wednesday. However, the New Zealand Dollar (NZD) could find support as hot inflation figures have reinforced market expectations that the Reserve Bank of New Zealand (RBNZ) will deliver another interest rate hike in September.
New Zealand‘s annual inflation accelerated to 4.1% in Q2, up from 3.1% in Q1, topping both market expectations of 4.0% and the central bank’s forecast of 3.9%. Reaching its highest level since Q4 2023, inflation remains well above the RBNZs 1–3% target range.
The hot reading reinforces recent warnings from RBNZ Chief Economist Paul Conway regarding sticky inflation, boosting expectations for further policy tightening following the central banks July 8 rate hike, its first in three years.
The NZD/USD pair remains subdued as the US Dollar (USD) may regain its ground amid growing risk aversion tied to escalating geopolitical tensions between the United States and Iran.
CME FedWatch Tool indicates that markets are currently pricing in over 69% odds of at least a 25 basis-point rate hike at the upcoming September meeting. However, the Fed is widely expected to leave the federal funds rate unchanged. Despite this anticipated pause, expectations for tighter policy remain elevated beyond July.