NZD: Asia Wrap - Very Weak GDP Sees NZD Underperform Across The Board

NZGBs closed near session cheaps, with benchmark yields 4bps higher.

• The RBNZ meets on Wednesday, August 30 and is likely to cut rates 25bp to 3.0%, the mid-point of its estimated "neutral" range. While it paused at the July meeting, it was with a clear easing bias.
• With the cut widely forecast, attention will be on the revised RBNZ outlook and tone of the statement and press conference. The focus is likely to be on the projected OCR path and whether it is revised lower, suggesting further easing towards stimulatory territory as excess capacity persists.
• With the focus on the medium-term, the 2026 and beyond inflation forecasts will be the important ones and should remain around the 2% band mid-point. See MNI Preview here:
• On Thursday, Governor Hawkesby will appear before a parliamentary committee to talk about the latest Monetary Policy Statement.
• Swap rates are 5-6bps higher.
• RBNZ dated OIS pricing closed firmer across meetings. 23bps of easing is priced for tomorrow, with a cumulative 39bps by November 2025.
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 4.50% May-30 bond, NZ$175mn of the 4.50% May-35 bond and NZ$50mn of the 1.75% May-41 bond.

The NZD/USD had a range of 0.5917 - 0.5929 in the Asia-Pac session, going into the London open trading around 0.5925, +0.05%. US rates extended higher looking towards Powell's speech at Jackson Hole later in the week, this has seen the USD see some demand return as the market pares back risk going into it. The NZD/USD again found some demand back towards 0.5900 and is consolidating just above there. While still firmly in the 0.5850-0.6150 range it's tough to discern any real direction, though risks are slightly skewed to more USD upside as positions are lightened heading in Jackson Hole. Risk has traded a little lower this morning, E-minis -0.20%, NQU5 -0.25%.

• MNI RBNZ Preview-August 2025: Rate Cut, Focus On OCR Path.  The RBNZ meets tomorrow and is likely to cut rates 25bp to 3.0%, the mid-point of its estimated "neutral" range. While it paused at the July meeting, it was with a clear easing bias.
• With the cut widely forecast, attention will be on the revised RBNZ outlook and tone of the statement and press conference. The focus is likely to be on the projected OCR path and whether it is revised lower suggesting further easing towards stimulatory territory as excess capacity persists.
• With the focus on the medium-term, the 2026 and beyond inflation forecasts will be the important ones and should remain around the 2% band mid-point.
• RBNZ-dated OIS pricing is slightly firmer across meetings with 23bps of easing priced for tomorrow’s meeting, with a cumulative 41bps by November 2025.
• “NZ 2Q PRODUCER OUTPUT PRICES RISE 0.6% Q/Q" - BBG
• Options : Closest significant option expiries for NY cut, based on DTCC data:  none. Upcoming Close Strikes :  0.5925(NZD400m Aug 20), 0.5980(NZD660m Aug 21). - BBG
• CFTC Data shows Asset Managers have cut their longs completely and started to rebuild a short adding slightly in the NZD -3679(Last -1811), the Leveraged community though reduced their own shorts slightly -4190(Last -6778).
• AUD/NZD range for the session has been 1.0952 - 1.0974, currently trading 1.0955. The Cross is trying to push higher but continues to stall back towards 1.1000 and will need a sustained break here to potentially extend. Until then the range looks to be 1.0850-1.1000.

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

Gold continues to range trade falling to a low of $3326.25/oz early in the session before rising to $3341.67. It is currently up 0.1% to $3337.5. It has not reacted to the progress made in talks between the US and Ukraine/Europe and the prospect of Presidents Zelenskyy and Putin meeting. The US dollar and US yields are also little changed. The outlook for the Fed remains the market’s focus with Chair Powell scheduled to speak on Friday at the Jackson Hole central bank conference.

• Despite recent narrow ranges, gold is still seen as having upside with UBS forecasting it to reach $3700/oz by mid-2026, according to Bloomberg.
• Silver is down 0.2% to $37.945 but off the intraday low of $37.735. It is up 3.4% in August.
• Equities are mixed with the S&P e-mini down 0.2% and Nikkei -0.2% but Hang Seng up 0.2% and Straits Times +0.6%. Oil prices have continued their downtrend after stabilising Monday with WTI -0.7% to $62.99/bbl. Copper is 0.2% higher.
• The Fed’s Bowman speaks and US July housing and Canadian July CPI data are released.