TD Securities' FX strategist Howard Du maintains a bearish stance on the New Zealand Dollar (NZD), citing that the Reserve Bank of New Zealand's (RBNZ) tightening measures are largely priced into the market and NZD positioning has normalized since the hawkish July RBNZ rate hike [1]. The strategist notes that the FX market has sharply reduced its short NZD positions against both the US Dollar (USD) and the Australian Dollar (AUD) following the July rate hike, but recent New Zealand data releases have not provided sufficient evidence to shift market pricing away from the RBNZ's latest Official Cash Rate (OCR) guidance [1].
Consensus in the market continues to expect another RBNZ rate hike at the upcoming meeting, with cumulative rate hike pricing for the rest of 2026 appearing elevated compared to the rest of the world [1]. However, the Q2 non-tradable Consumer Price Index (CPI) in New Zealand was more muted than the headline figure, suggesting that inflation risks may be skewed toward convergence with global trends in the coming months, potentially reducing pressure for further RBNZ rate hikes [1].
TD Securities forecasts that the AUD/NZD pair will remain supported above 1.20 in the coming months, with a year-end target of 1.22 for 2026 [1]. Regarding NZD/USD, the strategist believes that the threshold for the pair to sustain gains above 0.60 remains high, even in the context of broad-based USD weakness [1].
No specific market reactions or analyst opinions beyond TD Securities' outlook are mentioned in the article [1].
CONCLUSION
TD Securities maintains a bearish outlook on the New Zealand Dollar, expecting limited upside due to already priced-in RBNZ tightening and muted inflation data. The firm forecasts AUD/NZD to remain above 1.20, with a year-end target of 1.22, and sees a high bar for NZD/USD to rally above 0.60. Market expectations remain focused on another RBNZ rate hike, but softer inflation could ease future rate pressures.