The New Zealand dollar held steady around $0.603 on Friday and remained on course for a weekly gain, as investors shifted their attention to next week’s Reserve Bank of New Zealand policy meeting. While the RBNZ is widely expected to leave interest rates unchanged, markets will focus on the updated economic and rate projections, particularly whether the Bank maintains mid-2027 as the projected timing for the first increase.
A mixed labor market report last week supported the case for steady policy in the near term. Even so, inflation has moved above target and economic activity has shown signs of firming, reinforcing expectations of eventual policy tightening. Traders currently assign a 75% probability to a rate hike in September, with a move fully priced in by October.
Adding to the case for higher rates, data released today showed that while manufacturing sector growth slowed in January, it remained above its long-term average. At the same time, business inflation expectations for both one- and two-year horizons increased in the first quarter. The kiwi has gained about 0.4% so far this week.
