We continue to disagree with the full hike priced for the RBNZ by April 2024, and instead think that the RBNZ will begin cutting rates in Q2 2024 in order to keep real rates from becoming too restrictive. These headwinds support our call for NZD/USD to trade towards 0.57 by year-end. 

We expect NZD/USD to rebound towards the 0.63 level by Q4 2024, as the USD comes off overvalued levels and the terms of trade support the currency. El Nino is likely already impacting New Zealand’s terms of trade, and it will continue to boost the NZD as it strengthens into next year.