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The New Zealand dollar emerges as a standout performer, marking a notable gain of approximately +0.6% against the US dollar in recent overnight trading. A week-long ascent from the low of 0.6038 on February 5th to an overnight high of 0.6135 paints a picture of Kiwi strength. Particularly striking is its dominance against the Aussie, pushing the AUD/NZD rate to its lowest since May of the previous year, lingering just below the 1.0600-level.
Fuelling this surge is the unexpected hawkish turn in the Reserve Bank of New Zealand's (RBNZ) rate hike expectations this month. The implied yield on the December 2024 New Zealand three-month interest rate futures contract has surged by approximately 60 basis points since the beginning of February. The market now anticipates a higher probability of the RBNZ executing one final rate hike before potentially reversing course and implementing rate cuts later in the year. As of now, around 22 basis points of hikes are priced in by the May RBNZ policy meeting, with the expected number of cuts by year-end scaled back to only about 36 basis points.
Noteworthy Friday’s reports from ANZ bank, revising their RBNZ call, add further momentum to market expectations. ANZ now forecasts two additional 25 basis points hikes in February and April, influenced by robust labour market and Consumer Price Index (CPI) reports from New Zealand in Q4.
NZDUSD 30min 
Source: MetaQuotes ACY Securities
Shifting focus to last week's market wrap-up, global markets experienced consolidation amid a lack of fresh data triggers. Federal Reserve Bank of Richmond President Barkin echoed caution about the timing of rate cuts, contributing to a patient market sentiment. ECB Chief Economist Lane highlighted near-term disinflation occurring faster than anticipated, emphasizing the need for further progress toward the 2% goal. ECB Governing Council member Wunsch expressed concerns about wage growth not aligning with the 2% inflation target, advocating for a wait-and-see approach before considering rate cuts. The S&P 500, while marginally lower at the time of writing, flirted with record highs, and the Euro Stoxx 50 closed 0.7%, while the FTSE 100 fell 0.4%. Meanwhile, the US 10-year note saw a 2 basis points lift to 4.14%, and oil prices trended higher with WTI reaching USD76.1/bbl, a 3.0% increase. Gold, however, experienced a slight dip of 0.1%, closing at USD2,033/oz.
Insights Inspired by MUFG & ANZ: Credit to Their Analysis for Shaping Some Aspects of This Text
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