New Zealand Dollar slips even as RBNZ rate hike expectations rise

• NZD/USD drops 0.25% on Monday even as further monetary tightening is expected in New Zealand.
• A third successive interest rate increase is expected by markets, taking the benchmark rate to 3.0%.
• Ahead of the Fed's monetary policy announcement and major US economic releases, the US Dollar continues to face pressure.

Growing expectations of an interest rate increase in New Zealand have failed to prevent NZD/USD from falling 0.25% on Monday to around 0.5680 at the time of writing. With investors awaiting several major monetary policy announcements and economic releases this week, the New Zealand Dollar (NZD) is finding little support from the prospect of additional tightening by the Reserve Bank of New Zealand (RBNZ).

Another interest rate increase has become the focus of expectations ahead of the RBNZ's next policy announcement. TD Securities has revised its near-term outlook for the central bank, explaining that “we had forecast the RBNZ to pause at its October meeting. We now forecast the Bank to hike the Official Cash Rate 25bps at this week's meeting to 3%.” The revised timing has not altered the bank's expectations for subsequent increases, with its strategists stressing that “nonetheless, we stick to our call for 25bps hikes in December and February. Accordingly, this pushes our terminal rate from 3.25% to 3.50%.”

Although New Zealand's latest figures showed a slightly greater-than-expected easing in third-quarter inflation, economists expect consumer price growth to accelerate again in the fourth quarter. That could lift inflation above 4%, outside the RBNZ's 1% to 3% target range.

To curb price pressures, the central bank could respond to this outlook with further monetary tightening, which could in turn lend support to the New Zealand Dollar.

Expectations that the Federal Reserve (Fed) will keep interest rates on hold at its 27–28 October policy meeting continue to weigh on the US Dollar (USD).

Market pricing puts the probability of unchanged rates in October at 90%, according to the CME FedWatch tool. For December, the implied chance of another interest rate increase is 79%.

NZD/USD could benefit from this possible divergence in the two central banks' monetary policies, especially if the RBNZ signals that it intends to keep raising rates.

Among the forthcoming US economic releases attracting close investor attention are the Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred measure of inflation, and preliminary third-quarter Gross Domestic Product (GDP) figures. By shaping expectations for the future course of US interest rates, these reports could also affect the US Dollar's direction.

NZD/USD holds between key moving averages

At 0.5687 on the one-hour chart, NZD/USD remains between its key moving averages. The pair is above the 200-period simple moving average (SMA) at 0.5665, yet just below the 100-period SMA at 0.5689. This positioning suggests limited intraday upside within a broadly supported structure. Following the recent retreat from the 0.5700 area, momentum appears consolidative: the Relative Strength Index (14) stands at 47.2, marginally below the neutral 50 threshold.

The 100-period SMA at 0.5689 provides the nearest upside resistance, with the horizontal barrier at 0.5710 beyond it. Initial downside support lies at the horizontal level of 0.5668, followed by the 200-period SMA at 0.5665. Buyers would be expected to defend the broader intraday range at the latter level.

(The technical analysis of this story was written with the help of an AI tool. Know more.)