The Reserve Bank of New Zealand will announce monetary policy at 01:00 GMT tomorrow, and it is a close call between a 50 bps and a 75 bps hike. In any case, the impact on the Kiwi is set to be short-lived, economists at ING report.

Any post-meeting NZD moves to be short-lived

“We see 50 bps as more likely, as signs of an accelerating housing market contraction warn against an overly aggressive approach. Markets (66 bps in the price) and the majority of economists are, however, leaning in favour of a 75 bps move.”

“A half-point hike would likely be seen as a dovish surprise by markets at this point, but a significant revision higher in rate projections could mitigate any negative impact on the New Zealand Dollar. Either way, expect any post-meeting NZD moves to be short-lived, as global risk dynamics and China news will soon be back in the driver’s seat for the currency.”

“NZD/USD is at risk of falling back below 0.60 before the end of this year, while we target a gradual recovery to 0.64 throughout the whole of 2023.”