The New Zealand dollar (NZD) plunged against the US dollar on Wednesday as traders priced in a significant rate cut from the Reserve Bank of New Zealand (RBNZ) next month. This reaction follows weaker-than-expected inflation data, which confirms the ongoing disinflationary trend in New Zealand’s economy.
The latest inflation report for the third quarter has intensified speculation that the RBNZ will opt for a “jumbo” rate cut, possibly exceeding 50 basis points. This aggressive easing is aimed at stimulating economic growth and steering inflation back to the central bank’s target range.
The NZD’s sharp decline highlights the widening interest rate gap between New Zealand and the United States. As the RBNZ moves towards monetary easing, the US Federal Reserve remains hawkish, with further rate hikes still a possibility. This policy divergence is a key driver behind the NZD/USD’s downward momentum.
Looking ahead, analysts are keeping a close eye on upcoming data, including New Zealand’s GDP and business confidence surveys, for additional clues on the RBNZ’s next move. Any further rate cuts are expected to add more downward pressure on the NZD, with significant implications for the currency’s future trajectory.
