The NZD/USD pair moved up to around 0.5955 during early European trading on Friday. The New Zealand dollar (NZD) saw a slight increase against the US dollar (USD) after some hawkish indicators from the Reserve Bank of New Zealand (RBNZ).
On Friday morning, RBNZ Governor Anna Breman mentioned that further increases to the official cash rate (OCR) seemed likely sooner than previously thought, attributing it to inflation resulting from Middle Eastern conflicts, a slowdown in economic growth, and rising costs in New Zealand and its trade partners.
At its May meeting on Wednesday, the Bank of New Zealand decided to keep the OCR steady at 2.25%. Three members of the board favored a quarter-point increase, while three opted to maintain the current rate. This has prompted traders to reassess the interest rate outlook for New Zealand, with expectations now leaning towards several rate hikes by early 2027.
Meanwhile, the April data for the US personal consumption expenditure (PCE) price index highlighted that inflation in the US continues to be significant. This data strengthens the notion that the Federal Reserve will take a careful approach regarding interest rates. Currently, traders believe there’s about a 36.6% probability that the Fed will increase the rates by 25 basis points before the year ends, according to insights from the CME FedWatch tool.
