NZD/USD trades around 0.5850 on Thursday at the time of writing, down 0.15% on the day.
The New Zealand Dollar (NZD) remains under pressure following the release of softer inflation expectations in New Zealand, which cast doubt on the prospect of further monetary tightening by the Reserve Bank of New Zealand (RBNZ)
However, weakness in the US Dollar (USD) following subdued US inflation data helps limit the pair’s decline. The RBNZ’s two-year inflation expectations, a closely watched horizon for assessing how monetary policy feeds through to prices, ease to 2.34% in the third quarter of 2026 from 2.53% in the previous quarter. One-year inflation expectations stand at 2.6%.
The decline could temper expectations that the New Zealand central bank will deliver another 25-basis-point interest rate hike at its September meeting. Financial markets had previously shown greater confidence in the prospect of another rate increase, which could support the Kiwi. However, lower inflation expectations reduce the need for the RBNZ to tighten monetary policy further.