ING’s FX Strategist Francesco Pesole anticipates that the Reserve Bank of New Zealand (RBNZ) will deliver a hawkish hold at its meeting on 27 May, while cautioning that markets may be underestimating the risk of a surprise rate hike at this meeting [1]. Pesole expects new RBNZ projections to signal monetary tightening beginning in the third quarter, with the first of two 25 basis point hikes likely starting in July [1]. ING’s current forecast is for a total of 50 basis points of tightening in 2026, though this outlook is highly dependent on energy market dynamics [1].
Swap market pricing currently reflects a 21 basis point increase for July and 75 basis points by year-end, and ING suspects that RBNZ communication at the upcoming meeting will aim to maintain this hawkish market pricing [1]. If the RBNZ’s revised rate projections align with ING’s expectations, markets could interpret this as an implicit endorsement to continue pricing in around three hikes by year-end [1]. Even if geopolitical tensions in the Middle East ease, ING sees limited incentive for markets to price in fewer than two hikes [1].
Pesole notes that the New Zealand Dollar’s (NZD) performance remains largely influenced by global factors, including Middle East developments, global risk sentiment, and US interest rate expectations [1]. However, the prospect of proactive RBNZ tightening is seen as supportive for the NZD, as markets tend to favor currencies backed by central banks that are tightening policy [1].
Looking further ahead, ING maintains its forecast for NZD/USD to rise above 0.60 in the second half of 2026, contingent on a relatively benign resolution in the Gulf region, two RBNZ hikes, and one US Federal Reserve rate cut by year-end [1].
CONCLUSION
ING’s outlook suggests that the New Zealand Dollar could benefit from a hawkish RBNZ stance and potential rate hikes, with a forecast for NZD/USD to exceed 0.60 in 2H26. Market pricing currently reflects expectations for multiple hikes, and the central bank’s communication at the upcoming meeting will be closely watched for confirmation. The NZD’s trajectory remains sensitive to global developments and energy market dynamics.