The pair is falling like a stone after the Reserve Bank of New Zealand decision. Although the central bank raised the policy rate by 25 basis points, the kiwi dropped broadly — for example, it fell nearly 200 pips versus the Australian dollar. Against the US dollar, the New Zealand currency also took a substantial hit. Tuesday's high was 0.5923, while on Wednesday sellers have already tested the 0.57 area.
So, following Wednesday's meeting, the RBNZ raised the policy rate by 25 basis points — from 2.50% to 2.75%. The decision was taken by consensus, i.e., unanimously: all members of the Committee supported the tightening. This is a key difference from the May meeting, when votes were split 3–3, and Governor Anna Breman's decisive vote kept the rate unchanged.
At the September meeting, the Committee showed unanimity on the rate hike, but divisions remained within the Committee regarding inflationary risks. Four RBNZ members said those risks are skewed to the upside, while the others called them balanced, even as they emphasized significant risks to economic activity.
As a result, the RBNZ said the future path of the policy rate is not predetermined — further decisions will depend on incoming data and the balance of medium-term inflation risks. Moreover, the OCR forecast itself was practically unchanged from May's projection despite the implemented tightening. The central bank expects the rate to be around 2.8% by the end of this year and 3.15% by the end of 2027. That effectively corresponds to one more 25-basis-point hike in December, assuming a pause at the October meeting.
Those relatively cautious projections acted as a cold shower: market participants who had been pricing a more aggressive tightening cycle — possibly pushing the rate toward 3.5% — must now materially lower their expectations.
At the same time, the inflation picture does not look unequivocally hawkish. Yes, headline CPI accelerated year?on?year to 4.1%, but the main driver of that rise was higher fuel and fuel?related prices amid the ongoing Middle East conflict. Inflation excluding motor fuels fell to 2.9%; most core inflation indicators remain inside the 1–3% target range, and inflation expectations over the one? to two?year horizon have declined.
It is also worth noting that at the September meeting, the central bank spoke in some detail about the weaknesses of the national economy. Committee members noted that Q2 GDP growth was sluggish, unemployment remains elevated, consumer spending is weak, and spare capacity (especially in the labor market) remains significant. As a result, the RBNZ acknowledged the risks of a decline in economic activity as "material."
The New Zealand dollar came under significant pressure for a simple reason: market participants expected more hawkish and clearer signals from the central bank about the future path of rates. Instead, the RBNZ effectively signaled a likely pause in October while leaving the door ajar for further tightening in December. The classic trading adage "buy the rumor, sell the fact" therefore played out. For NZD/USD, this is especially sensitive to changes in the interest?rate differential — US yields are rising faster than New Zealand yields, so the carry advantage that might have supported the kiwi is narrowing. An additional blow to NZD/USD was the broad strengthening of the greenback: the escalation in the Middle East sparked demand for safe?haven assets, pushing oil prices higher and strengthening expectations of Fed rate hikes before year?end.
From a technical standpoint, the situation is mixed. On the 4?hour chart, NZD/USD bears have broken the 0.5830 support (the lower Bollinger Band on the daily chart) and are trading below all Ichimoku lines, which have produced a bearish "Parade of Lines" signal. However, on the daily chart, sellers have not managed to close decisively below the key support at 0.5800 (the upper boundary of the Kumo cloud, coinciding with the daily lower Bollinger Band). That is the critical and largely decisive level. If NZD/USD buyers can hold above this target, short positions will lose relevance (including due to profit?taking). In that case, a retracement to the 4?hour middle Bollinger Band — roughly the 0.5890 area — is likely. Conversely, a confident break of 0.5800, followed by consolidation below it, would materially increase the probability of further declines toward 0.5750 and lower.
The next 24 hours may be decisive: the balance will tilt in favor of either buyers or sellers depending on whether bulls can defend 0.5800. Therefore, it is sensible to adopt a wait?and?see stance on the pair now. A reliable bounce from that level will be the first signal in favor of an upward correction, whereas a break and close below it will significantly strengthen bearish sentiment.
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