Below 0.5700: New Zealand Dollar eases on RBNZ rate hike odds as CPI inflation data come into focus

• 0.5680 is the approximate level for NZD/USD as it slips in early Asian trading on Wednesday.
• An October RBNZ rate hike now carries an 80% probability in investor pricing, up according to swaps data.
• Traders trimmed October rate-hike expectations after comments from the Fed Chair.

NZD/USD slips towards 0.5680. The decline in Wednesday’s Asian session ends a four-day run of gains. Caution prevails ahead of New Zealand’s third-quarter (Q3) Consumer Price Index (CPI) inflation release, due later on Thursday.

A modest easing in New Zealand’s third-quarter inflation is expected by economists. Any relief could prove temporary: rising oil prices are set to push inflation higher in the year’s final three months, strengthening the argument for rate increases. Forecasts put Q3 CPI growth at 3.8% YoY, against 4.1% in Q3. Quarter-on-quarter inflation is expected to slow from 1.5% in Q2 to 0.8% in Q3.

Nearly an 80% probability of a Reserve Bank of New Zealand (RBNZ) rate increase to 3.00% at next week’s policy meeting is now reflected in swap markets.

Oil prices and the currency posed upside risks to the RBNZ’s Q4 outlook, Chief Economist Paul Conway said last week. Describing the likely direction of interest rates, Conway said the path “is most likely up”, although October’s decision remained “wide open.”

By contrast, expectations of an October Federal Reserve (Fed) rate increase have been pared back following comments by Chairman Kevin Warsh. Speaking at the IMF’s annual meetings in Bangkok last week, Warsh offered no signal on the outcome of this month’s FOMC meeting. He nevertheless said inflation exceeding expectations had not altered his view of the US economy.

According to the CME FedWatch Tool, market pricing puts the probability of unchanged central bank interest rates next week at 83.9%. The implied chance of a December rate increase stands at 90%.

Q3 Inflation Expected Above Target; RBNZ Hike Odds Support New Zealand Dollar

New Zealand’s Q3 CPI release on Wednesday should broadly match official forecasts, according to Brown Brothers Harriman strategists. They note that “headline CPI is expected at 0.8% q/q (RBNZ projection: 0.8%) vs. 1.5% in Q2 to be up 3.8% y/y (RBNZ projection: 3.9%) vs. 4.1% in Q2.” In their assessment, “above target inflation argues for additional RBNZ rate hikes and offers NZD support,” while the swaps curve implies “80% odds of a 25bps RBNZ rate hike to 3.00% on October 28.”

5.6/10 Speechtracker Score: Warsh Highlights Investment and AI, Leaves Fed Decisions Open

At 5.6/10, the FXS Speechtracker score for Fed Chair Warsh’s remarks was slightly below its historical average of 6.1/10. His message was cautiously constructive. Warsh’s acknowledgement of being "over-scarred" by the Global Financial Crisis highlights his sensitivity to risk, despite his emphasis on structural growth and an investment upswing fuelled by "good policies,". He declined to prejudge the October and December meetings. His focus on AI, both as a source of demand and as a way to strengthen confidence in data, together with planned field hearings and task forces, suggests a forward-looking Fed. It remains alert to stronger growth dynamics as well as potential downside tail risks to financial stability.

A 0.00-point change left the FXS Fed Sentiment Index unchanged at an elevated 127.51. The reading indicates that the overall stance remains firmly hawkish, notwithstanding the marginally softer tone registered by the FXS Speechtracker. In FX markets, the strong investment narrative, commitment to price stability and high index reading suggest continued support for the Dollar. Together, they underpin expectations of a vigilant Fed that has yet to signal a dovish shift.

100-Day SMA Caps NZD/USD: Technical Outlook Remains Negative

At 0.5681 on the daily chart, NZD/USD remains below both the 100-day simple moving average (SMA) of 0.5774 and the upper Bollinger Band of 0.5691. This positioning maintains a bearish near-term bias, with the overhead cluster continuing to restrict price action. Underlying support lies at the middle Bollinger Band near 0.5631. Meanwhile, the Relative Strength Index (RSI) has recovered to neutral territory at 51.7, pointing to stabilising momentum rather than a decisive bullish turn.

The upper Bollinger Band around 0.5691 marks the first resistance level. Beyond it, the 100-day SMA at 0.5774 sustains the broader downside bias until the pair regains that level. Immediate support sits at the middle Bollinger Band of 0.5631; a break below would bring the lower Bollinger Band near 0.5572 into view as the next bearish objective.

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