NZD/USD bounced immediately following the Reserve Bank of New Zealand (RBNZ) meeting, but it has struggled to hold on to gains. The focus is on the dollar side of the equation, therefore, the kiwi could enjoy gains as the greenback may have peaked, economists at ANZ Bank report. 

Rate differentials are supportive of the kiwi

“Rate differentials are supportive of the kiwi. However, at the moment they are being overshadowed by growing fears in FX markets of a domestic hard landing and we view that as a potential headwind for the NZD.” 

“There are signs that the USD has topped out, which is consistent with the historic tendency for the USD to peak early in the Fed tightening cycle.” 

“Bringing it all together speaks to a more neutral outlook, but if the USD has peaked, that is likely to trump domestic considerations, and deliver mild further strength over coming quarters.”