The New Zealand dollar inched up to $0.590 but remained on course for a weekly loss, weighed down by fears of a broader and more sustained conflict in the Middle East. Escalating geopolitical tensions have prompted investors to pull back from risk-sensitive assets, including the kiwi. The accompanying surge in energy prices has added further pressure, as New Zealand’s substantial dependence on imported oil leaves the economy particularly exposed to rising fuel costs.
At the same time, investors are awaiting the release of the US jobs report later today for additional guidance on the Federal Reserve’s policy path. On the domestic front, markets are currently pricing in about an 80% chance that the Reserve Bank of New Zealand will raise the official cash rate in September, with roughly 40 basis points of cumulative tightening anticipated over the course of the year. This pricing is notably more hawkish than the RBNZ’s own projections, which indicate that even a single rate hike in 2024 is not yet a certainty.
