BNZ Research

NZD forecast update: Pausing for breath

The upward trend in NZD/USD stalled at the end of the first half of the year, with the currency reversing direction through July and raising a question-mark about whether the previous trend will resume. The chart below highlights this earlier upward trajectory (red line) and its subsequent loss of steam. Looking beyond initial optimism, the NZD has effectively been confined to a trading range between 0.5850 and 0.6120 since mid-April.

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NZD Corporate FX Update

The upward trend in NZD/USD in the first half of the year – driven by broad-based USD selling pressure – has been arrested, with some retracement through July so far.

The near-term outlook for FX markets is clouded by uncertainty on where US policy lands on tariffs. The previous 9-July deadline for implementing higher tariffs was delayed until 1-August. Not forgetting that early April was the original date for much higher tariffs, it wouldn’t surprise if further delays ensued.

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GDP likely lower in Q2

We have been warning of an economic contraction in Q2 for some time. Today’s data strongly support that notion.
Our estimate for Q2 GDP has been lowered to -0.5% q/q (from -0.2%) after crunching through today’s mass of manufacturing, wholesale trade, and services data.

Job ads few and far between

Labour market conditions remain soft. Indicative of this, after falling nearly 50% from their peak, job ads have wobbled around the same low level for over a year. In the three months ended July, there was a further 0.3% reduction in the number of ads relative to the previous three months.

ANZ business survey still robust

August’s ANZ Business Opinion survey continues to portend growth ahead. Yes, the own activity indicator eased from 40.6 to 38.7, but its level is still consistent with annual GDP growth around 3% on our estimates. This is well above our (and the RBNZ’s) current forecasts. We assume most of the responses were prior to the RBNZ’s dovish pivot last Wednesday.

RBNZ Doves Fly

The RBNZ is back on the warpath. Not only did it cut its cash rate 25 basis points to 3.0% but, in today’s Monetary Policy Statement, it gave a very strong indication there is even more to come. Accordingly, we are adding a further 25 point cut in November in addition to the cut we were already anticipating for October. This takes the low in the cash rate to 2.50%.

Treading water

New Zealand’s services sector continued to display contraction for a sixth consecutive month, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for July was 48.9 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). Although the PSI again improved from its previous month's value, it was still well below the average of 52.9 over the history of the survey.

BusinessNZ's CEO, Katherine Rich said that while the July result was a continued improvement from 44.3 posted in May, the sector has not experienced expansion for 17 consecutive months. For the sub-index results, Activity/Sales (47.5) was still unable to exhibit any expansion, while New Orders/Business (50.0) displayed no change. Stocks/Inventories (51.4) did show expansion for the second consecutive month, although Employment (47.1) remained in contraction for 20 consecutive months.

The proportion of negative comments for July (58.5%) was down from June (66.2%) and May (65.6%). Service sector businesses reported declining sales, reduced spending, and low confidence due to cost-of-living issues, inflation, high interest rates, and a slow economy. Other challenges included seasonal downturns, weather impacts, rising costs, staffing issues, and uncertainty from global conditions.

BNZ's Senior Economist Doug Steel said that "combined with recent improvement in the Performance of Manufacturing Index (PMI), electronic card transactions and ANZ’s Truckometer, there are accumulating early signs of life in the economy".

Q3 inflation still lining up 3%

The main interest in today’s July Selected Price Indexes was to see what they suggested for our thoughts on Q3 CPI and related influence on household disposable incomes.

Return to expansion

New Zealand’s manufacturing sector moved back into expansion during July, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for July was 52.8 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was up from 49.2 in June and above the average of 52.5 since the survey began.

BusinessNZ’s Director, Advocacy Catherine Beard said that after a couple of challenging months for the sector, the upswing in activity for July saw a return to levels of expansion seen during the start of 2025.

“All five main sub-index values were in expansion during July. This was led by New Orders (54.2), which reached its highest level of activity since March 2022. Similarly, Production (53.6) was at its highest level since August 2022. Finished Stocks (51.8) and Deliveries of Raw Materials (51.9) recorded similar levels of expansion, while Employment (50.1) managed to get just above the no change mark after two previous months in contraction."

Despite the return to expansion, the proportion of negative comments from respondents stood at 58.6% in July. However, this was down from June (65.5%) and May (64.5%). Negative comments indicate that manufacturers report weak demand, falling orders, rising costs, inflation, and ongoing economic uncertainty, which has been worsened by tariffs, slow construction, and low consumer spending. Many cite a lack of confidence, delayed projects, and customers ordering only what is immediately needed, creating stagnant market conditions.

BNZ’s Senior Economist Doug Steel said that “given the prevailing headwinds it is, perhaps, even more encouraging that the PMI has moved back into expansion. It will need to be sustained or nudge a bit higher to be consistent with our economic forecasts, but it is good to see a move for the better".

Relative growth drives Aussie migration

Following a period of underperformance, we expect economic growth in New Zealand and Australia to soon converge.

Labour market demands further easing

Today’s labour market data were unequivocally weak. They should put the seal on an August rate cut and increase the odds of one more thereafter. But the big question on everyone’s lips is: are the data sufficiently weak that Prime Minister Luxon will feel the need to ask the Government Statistician, Mary Craig, to relinquish her post?

Business expectations hold firm

The ANZ Business Survey continues to portray a positive economic outlook. Forward-looking indicators for growth, investment and employment were little changed in July and remain firmly optimistic. This buoyancy is a far cry from current conditions and is yet to show up meaningfully in actual economic outcomes.

BNZ & SEEK Employment Report: No joy in June

The trend in job ads has resumed its downward slide, declining another 1.2% in June. Labour demand has weakened further. After a year of relative stability, ads are again on a downwards trajectory.

Inflation to test the top of RBNZ target band

Today’s June Selected Price Indexes support our view that Q2 CPI inflation will print above the RBNZ’s MPS forecasts and sets up a further nudge higher in Q3.

Ongoing Contraction

New Zealand’s services sector displayed contraction for a fifth consecutive month, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for June was 47.3 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). Although this was 3.2 points up from May, it was still well below the average of 52.9 over the history of the survey.

BusinessNZ's CEO, Katherine Rich said that while the June result saw most of the sub-index results display a higher value than the previous month, it continued the theme of ongoing contraction in a sector that has only seen one month of minimal expansion over a 16-month period. For the sub-index results, the key results for Activity/Sales (44.5) and New Orders/Business (48.8) were still unable to show any expansion. Stocks/Inventories (50.6) did show expansion for the first time since November 2024, although Employment (47.2) remained firmly in contraction, which has now been the case for 19 months.

The proportion of negative comments for June (66.2%) was up from May (65.6%) and April (61.8%). Service sector businesses face weak consumer confidence, high living costs and economic uncertainty. Reduced spending, inflation, rising interest rates, and public sector cutbacks are key pressures, with winter and fewer tourists further dampening demand.

BNZ's Senior Economist Doug Steel said that "while the headline PSI measure did lift from 44.1 to 47.3, every month it remains below 50 suggests service sector conditions are getting worse not better. The timeline for New Zealand’s long-awaited economic recovery just keeps getting pushed further and further out".

Still in the red

New Zealand’s manufacturing sector continued to show contraction during June, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for June was 48.8 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). While this was up from 47.4 in May, it was not enough to see the sector climb out of contraction. The survey was also well below the average of 52.5 since it began.

BusinessNZ’s Director, Advocacy Catherine Beard said that the positive start to the year is now being undone somewhat by manufacturers that are currently struggling to see expansion in most elements of their business.

“Four of the five main sub-index values were in decline. New Orders (51.2) improved the most from May to June to show some optimism for the months ahead, while Production (48.6) inched closer to the no-change mark of 50. However, Finished Stocks (46.9) dipped to its lowest value since December 2024 after five consecutive months of expansion, while Employment (47.9) remains in contraction after a sizeable drop in activity the month before."

The proportion of negative comments from respondents for June (65.5%) was almost identical to May (64.5%). Comments indicate that manufacturers report a major slowdown due to weak consumer demand, high living costs, and economic uncertainty. Falling construction activity, rising input costs, and global instability are reducing orders and cashflow, while supply chain issues add further pressure.

BNZ’s Senior Economist Doug Steel said that “looking across the PMI sub-indices, they all remain well below their historical averages. Despite talk of an economic recovery, conditions are still very tough".

Households under pressure

Stats NZ produces a quarterly update on the income, savings, assets and liabilities of the household sector. These releases are not followed that closely but we believe they contain a wealth of information. Granted the data are still a tad experimental in nature so should be treated with a modicum of caution especially with regard to levels. But we still think the direction of change provides great insight.

QSBO, and our RBNZ MPR Preview

We’ve been waiting for today’s QSBO to decide whether or not to maintain our view that the RBNZ will lower its cash rate at its July 9 meeting. To be completely honest all the QSBO has done is further muddy the waters. In the end, though, we have reached the conclusion that it will be hard for the RBNZ to cut at this meeting given that post the MPS it suggested market pricing would be a key driver of its decision. In some ways the RBNZ is in a comfortable spot. The market is not looking for a cut in July but still thinks another rate reduction is a done deal with the chance of more. The RBNZ thus will feel no need to rock the boat.

Job ads 50% below peak

New job ads dropped 2.1% m/m in May. The latest fall follows two consecutive monthly increases and is a timely reminder that the labour market is still soft. Taking a step back from month-to-month volatility, ads have been broadly flat for nearly a year now, following very large prior declines.

New Zealand at a Glance

In theory the New Zealand economy should be on a sustainable upward path. But a weak starting point coupled with massive geopolitical uncertainty and a modicum of domestic political concerns is adversely impacting investment and hiring activity. In this environment the labour market will remain relatively weak for some time. We still think the positives will eventually outweigh the negatives but believe another nudge lower in interest rates would be beneficial even if short-term inflationary pressures look problematic. Even with lower rates it appears that medium-term inflation will be contained.

Growth Confirmed, Eyes Ahead

At one level, whatever today’s GDP data reported for the first quarter of the year it was always going to come with a caveat that it predates a lot of material change.
Recent developments include the global trade upheaval that US President Trump’s ‘Liberation Day’ kicked off and the associated rapid elevation of uncertainty; escalating geopolitical tension; and a material softening in timely domestic economic indicators for Q2.

Current Account Rapidly Improving

The external accounts continue to improve, with the current account deficit narrowing to 5.7% of GDP in the year to March 2025. This is well below its peak of 9.2% in December 2022, largely due to high commodity prices, strong primary production and the recovery in international tourism. We expect the deficit to continue narrowing towards 4% over the next year.

Annual CPI inflation to clear 3.0%?

May month selected price indices are unequivocally hawkish. On balance the monthly data has turned out to be more inflationary than we had expected. This has caused us to revise upwards our Q2 CPI pick to 0.8%, from 0.6% previously. Importantly, this is well above the RBNZ’s 0.5% estimate for the quarter.

Service with a slump

New Zealand’s services sector continued to show further decline in activity during May, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for May was 44.0 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was down 4.1 points from April and well below the average of 53.0 over the history of the survey.

BusinessNZ's CEO, Katherine Rich said that after a return to small expansion in January, the sector has continually contracted month-on-month since then, reaching its lowest level of activity since June 2024. For the sub-index results, the key results for Activity/Sales (40.1) and New Orders/Business (43.2) were also the lowest since June 2024. Employment (47.2) fell back into further contraction, while Deliveries (45.7) remained unchanged from the previous month.

The proportion of negative comments for May (65.6%) was up from April (61.8%) and March (56.7%). Many businesses noted reduced demand and falling revenues due to rising costs, economic uncertainty and low consumer confidence. Comments noted customers spending less, delaying decisions, and responding cautiously to inflation, interest rates, and broader market instability.

BNZ's Senior Economist Doug Steel said that "the fall in the PSI follows the sharp decline in the Performance of Manufacturing Index (PMI) from 53.3 to 47.5. Together, they are consistent with the economy returning to recession. We’re a long way from forecasting this, but the data are a reminder of just how vulnerable the economy currently is".

Back in the red

New Zealand’s manufacturing sector fell back into contraction during May, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for May was 47.5 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was down from 53.3 in April and a return to contraction after four consecutive months of expansion. The survey was also well below the average of 52.5 since it began.

BusinessNZ’s Director, Advocacy Catherine Beard said that the May result was disappointing to see given the sector had appeared to have turned a
corner at the start of 2025 following a tough 2023-2024 period of contraction.

“Four of the five main sub-index values were in decline, with New Orders (45.3) showing the strongest level of contraction for May. Following healthy expansion from February-April, Employment (45.7) decreased 8.9 points to be at its lowest level of activity since July 2024".

The return to contraction also saw the proportion of negative comments from respondents increase to 64.5%, compared with 58% in April and 57.5% in March. Comments indicate that manufacturers are reporting a clear return to decline, driven by falling demand, weak orders, and low business confidence. Rising costs, economic uncertainty, and reduced consumer spending are compounding pressures, while forward orders and investment remain stalled.

BNZ’s Senior Economist Doug Steel said that “the New Zealand economy can claw its way forward over the course of 2025, but the PMI is yet another indicator that suggests an increased risk that the bounce in GDP reported for Q4, 2024 and Q1, 2025 could come to a grinding halt”.

RBNZ’s dovish pivot deals a blow to NZD in August

• Downward revision to US payrolls and Fed Chair Powell opening the door to a September easing supports risk appetite
• US rates lower and curve steeper; global equities power up to fresh record highs
• RBNZ also adopts a dovish pivot, driving down NZ rates; broad USD weakness, but NZD a laggard as NZ-global rate spreads fall

The cloud lifts on tariffs

• Tariff threats and trade deals were a key theme in July; tail risk of a global trade war evaporated as countries capitulated to Trump’s demands; more certainty provided on where the US is landing on tariffs
• Risk appetite higher, but closing of short positions in the USD drove broad gains, following its slump in the first half of 2025
• NZD/USD down 3½%, with mainly small net changes on the crosses

Jolly June

• Risk appetite improved in June, interrupted briefly by Middle Eastern conflict, sending global equities to fresh record highs
• Tariffs and US fiscal policy were relegated to the sidelines in terms of market drivers
• USD indices fell for a sixth consecutive month, to fresh three-year lows; NZD/USD rose over 2% to just under 0.61

Upcoming NZGB inflation linked Sep-50 syndication

NZ Debt Management (NZDM) has announced the joint lead managers for the syndication of the 20 September 2050 inflation-indexed bond (IIB) and indicated the transaction will be launched on the week beginning 8 September. The new IIB line, which extends the real yield curve, was first announced as part of the funding programme update alongside the Budget in May. Issuance volumes are expected to be at least NZ$1.0 billion and the transaction will be capped at NZ$2.0 billion.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe

Upcoming NZGB May-2031 tap syndication

At the Budget Economic and Fiscal Update in May, New Zealand Debt Management (NZDM) announced it expected to undertake three tap syndications of existing nominal NZ Government Bonds (NZGB) in 2025/26. In addition, a new September-2050 inflation indexed bond will be established. NZDM has indicated the first transaction will be a tap of the existing May 2031 line, before the end of August.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe

Smaller deficit likely

Q2 trade data supported our priors that net international trade is highly likely to be a net drag on economic growth in the quarter. We will finalise our Q2 GDP pick, currently at -0.2%, after tomorrow’s final partial indicators. Trade data revisions will act to narrow the current account deficit. A smaller deficit will likely be viewed favourably by rating agencies. Monthly indicators over the coming week will help shape thoughts for activity during Q3, chiefly the PMI on Friday and PSI next Monday.

Q2 GDP partial indicators trickling in

We get a couple more Q2 GDP partial indicators this week via international trade and building work put in place data. Both are expected to imply a drag on Q2 economic activity. While we are of the view that economic activity will show some improvement ahead, the extent of weakness (or otherwise) in Q2 activity is important to keep assessing. Merchandise terms of trade are expected to lift to a record high in this week’s Q2 data. Higher export prices are the driver, albeit with more signs that heat is coming out of commodity price inflation.

Retail sales strength surprises

Today’s 0.5% jump in June quarter retail sales volumes came as a complete surprise to us. It certainly provides ammunition to the market hawks and may be yet another sign the economy is building momentum. But we’re not getting carried away yet. More signs of progress are needed for us to feel comfortable with the growth story we are currently presenting. Hopefully, the week ahead will provide some of those.

A step in the right direction

The conditions the RBNZ laid out in July for further easing have been met in our view. The RBNZ is expected to cut the OCR 25bps to 3.00% on Wednesday. That is our forecast and the strong market consensus. The key outstanding question is: how much further might rates go after the cut to 3.0%? Economic indicators for July show some signs of life. Further gains are required to be consistent with our economic forecasts, but some improvement provides hope that the tide may be turning.

August MPS Preview

In its July Monetary Policy Review the RBNZ stated that “If medium-term inflation pressures continue to ease as projected, the Committee expects to lower the Official Cash Rate further”. In our opinion this condition has been satisfied meaning a 25 basis point cut at the August 20 Monetary Policy Statement (MPS) is a given. The bigger question is, what next?

NZ faces higher US tariff; labour market soft

NZ goods sold into the US are set to face a 15% tariff. This is a lift from the 10% that was put in place earlier this year. In addition to a higher rate, another adverse factor this time around is that NZ goods will no longer be facing the lowest possible tariff rate into the US. We anticipate this Wednesday’s Q2 labour market data to portray a softer market than the RBNZ published in its May MPS. Inflation expectations data is due too

Q2 Labour Market Preview

We expect next week’s data to portray a weak labour market via a dip in employment, push higher in the unemployment rate, and easing wage inflation. The labour market looks to be tracking softer than the RBNZ forecast in May. Today’s filled jobs data supports that view. Business and consumer confidence updates are due this week.

Green Light for August Easing

Any fear that today’s CPI outturn (0.5% for the quarter, 2.7% for the year) might convince the RBNZ to keep its finger on the pause button should have been shattered by the news that prices rose “just” 0.5% in the June quarter. We think an August cut is now as close to a done deal as can be the case.

Turning to inflation

The last few days have seen a number of high frequency activity indicators support our view that not only did the economy stall in the June quarter but it is also struggling to gain momentum going into Q3. Indeed, so poor have these indicators been that we have lowered our expectation for Q2 GDP to -0.2%, from zero, and have made exactly the same adjustment for Q2 employment. Attention turns to inflation over the coming week, with June Selected Prices on Thursday ahead of the Q2 CPI next Monday.

Eyes on RBNZ

Last week, we moved to expect no change in the OCR at this week’s RBNZ meeting. That is not to say we don’t still think there is a chance of, and indeed a strong case for, a 25bp OCR cut this week from its current 3.25%. But we reached the conclusion that it will be hard for the RBNZ to cut at this meeting largely because post the May MPS it suggested market pricing would be a key driver of its decision. The market is currently pricing little chance of a cut on Wednesday. As for data, the June PMI due on Friday is of most interest after last month’s plunge.

In confidence . . .

It is looking increasingly likely the RBNZ will stand pat when it delivers its July 9 Monetary Policy Review. Our formal view is for a 25 basis point cut but we recognise that the odds of this are diminishing by the day. Be that as it may, we think changing our call before seeing Tuesday’s NZIER Quarterly Survey of Business Opinion would be ill-advised.

Tensions and Trade

Further escalation in Middle East tension over the weekend brings an expectation of risk off and higher oil prices. If the oil price lift were to persist or extend, it threatens a lift in the cost of imports and to put upward pressure on inflation and potentially inflation expectations. None of this would be good for growth. This week’s trade data for May is expected to show very strong export growth and a rapidly narrowing annual deficit.

Economy Hits Q2 Brick Wall

Timely indicators like the PMI and PSI suggest the economy hit a brick wall during Q2. This does not deny what looks like a firm expansion in Q1, expected to be confirmed in this week’s data. May’s selected prices are expected to support our view that annual inflation pushed higher in Q2. A significant escalation in Middle East tensions has seen oil prices spike, adding yet more uncertainty to the global economic outlook. NZ’s large current account deficit is seen narrowing in Q1.

BNZ Markets Today

A massive downward revision to US nonfarm payrolls only caused a temporary ripple in markets and US Treasury yields are modestly higher for the session. US equities are slightly higher and the USD shows a modest gain.

BNZ Markets Today

Newsflow has been light but there has been some follow through of the price action seen on Friday night, following the softer than expected US payrolls report that supported the market’s view of the Fed restarting the easing cycle as soon as next week.

BNZ Markets Today

Weaker than expected US labour market data increased expectations for near term easing by the Federal Reserve and contributed to a rally across global bond markets. The weaker data weighed on equities. The S&P closed 0.3% lower after the index staged a modest recovery from the session lows. The US dollar was broadly weaker against G10 currencies. Oil prices declined ahead of the OPEC+ meeting that took place after the market close. Brent crude prices dipped towards US$65 at one point, the bottom end of the multi-month trading range.

BNZ Markets Today

A stronger US ISM services report didn’t flinch the bond market, with traders paying more attention to the softer labour market reports. Lower rates across the board have helped boost US equities. The USD has grinded broadly higher throughout the day, and the NZD has underperformed, falling to 0.5840 and lower on all the key crosses.

BNZ Markets Today

After coming under pressure in recent sessions, global bond markets got a reprieve, as weaker than expected US job openings data increased expectations for easing by the Federal Reserve. The recovery halted a bond market slide which has seen borrowing costs in some big economies reach the highest levels in years. Prior to the data, 30-year Japanese government bond (JGB) yields had reached a record high of 3.29% and 30-year UK gilts yields increased to 5.75%, the highest level in more than twenty-five years.

BNZ Markets Today

Bonds and equities have been hit as investor appetite for both soured. Global rates are modestly higher across the board and US and European equities are lower, down more than 1%. The USD is broadly stronger, and GBP has underperformed, falling more than 1%. The NZD has fallen to 0.5860 while NZD/GBP is stronger.

BNZ Markets Today

Markets have begun the week on a very quiet note with the US closed for the Labour Day holiday.

There has been no market reaction to the federal appeals court ruling, after the close on Friday, that Trump had no legal authority to impose country tariffs under the International Emergency Economic Powers Act. The ruling is no surprise, and we said at the time of their imposition that the tariffs would be contested in court as there was no emergency to introduce them. The tariffs will remain for now and dragged out further in the courts, hence the market’s collective yawn at the decision.

BNZ Markets Today

Global equities fell on Friday, but major indices have made strong gains during the month. The S&P advanced 1.9% in August, its fourth straight month of gains. US consumption and inflation data was broadly in line with consensus estimates and didn’t alter expectations the Federal Reserve will cut rates later in the month. After the weekly close, a US court has found most of the Trump administration’s tariffs to be illegal. However, the tariffs will stay in place pending a further appeal to the Supreme Court. A permanent halt on tariffs would reduce revenues which provide an offset to the administration’s tax cuts.

BNZ Markets Today

US equities are probing fresh record highs, the US Treasuries curve has flattened and the USD is broadly weaker.

After the bell yesterday, Nvidia’s earnings report was broadly in line with expectations but the market focused on its data centre segment, where that fell a little short of expectations. Furthermore, the company excluded any AI chip revenue from China from its projections as it awaits further information from the US government codifying the recently imposed export tax on chips to China. The stock was down as much as 5% in afterhours trading yesterday but nearly all of that fall has been evaporated in today’s session.

BNZ Markets Today

US and European equity indices are little changed, as investors look ahead to key technology stock Nvidia’s results, which are due after the market close. The results will be a test for the artificial intelligence driven move that underpinned the rally in US stock indices. There was limited economic data to provide the market with direction. The US has increased import tariffs on India to 50% in response to its purchases of discounted Russian oil. Brent crude was little changed near US$68 per barrel. The treasury curve extended its recent steepening trend and G10 currencies are firmer against the US dollar.

BNZ Markets Today

Following President Trump’s “firing” of Fed Governor Cook, US Treasury yields are lower and the curve is steeper, while the USD shows a modest broadly-based fall. US equity investors saw the dip in futures as a buying opportunity and the S&P500 shows a small gain.

BNZ Markets Today

It has been a typically quiet start to the new week with little newsflow to drive markets. Markets have settled after the significant price action seen in the wake of Fed Chair Powell’s dovish pivot in his speech at Jackson Hole on Friday night. Most economists have changed calls to include a 25bps cut at the Fed’s next meeting in September, with the caveat that it remains data dependent. A strong rebound in non-farm payrolls or an ugly CPI print ahead of the meeting could still derail the prospect of a rate cut, hence the market is pricing “only” 21bps for the meeting.

BNZ Markets Today

There were large moves across financial markets in response to US Federal Reserve Chair Powell’s widely anticipated address at the Jackson Hole economic symposium. Powell signalled the Fed may cut rates in September triggering large gains in equity markets, a rally in treasuries and a sharply weaker US dollar. The S&P closed 1.5% higher and the Russell 2000 index of small cap US equities gained almost 4%. Credit spreads narrowed.

BNZ Markets Today

Markets are trading cautiously ahead of Fed Chair Powell’s speech tonight, with lower US equities and moderately higher US Treasury yields. Currency movements have been modest. The NZD has traded a tight range overnight, flat around 0.5820, but has recovered on some key crosses.

BNZ Markets Today

Technology stocks weighed on the performance of US equity indices for a second day as investors rotated into value sectors like consumer goods, energy companies and healthcare. The Nasdaq is around 1% lower and close to 3% below the recent peak. Global bond yields are little changed with limited data to provide the market with direction. The US dollar and treasury yields declined after President Trump continued to pressure Fed officials.

BNZ Markets Today

Newsflow has been light, but US equities are weaker, led by a notable fall in tech stocks. The risk-off vibe has seen US Treasuries well supported, with modest falls in rates. Commodity currencies have underperformed, resulting in the NZD probing levels just below 0.59 again.

BNZ Markets Today

It has been a typically quiet start to the week for markets, with small movements across the board.
Focus is currently on the meeting at the White House between European leaders and President Trump to discuss the next steps in the Russia-Ukraine war, following the Trump-Putin meeting on Saturday. In a show of force and support for Ukraine President Zelensky, the heads of the UK, Germany, France, Italy and the EU have all made the effort to attend the meeting at short notice. Later today we’ll hear more about what offer European leaders might present Putin to support an end to the war.

BNZ Markets Today

US equities ended last week with a modest pullback amid mixed economic data. The closely watched US-Russia Summit in Alaska didn’t have any clear implications for markets. US retail sales rose in July and will help ease some of the concerns about the health of US consumers’ spending following the extreme economic uncertainty in April and May. However, the softening labour market and the expected pass through to prices from tariffs, suggests a meaningful acceleration is unlikely.

BNZ Markets Today

A hot US PPI print dampened the mood in the market, driving up US rates, but US equities recovered most of their fall. Higher rates drove broad gains in the USD and the NZD has underperformed, down 1% overnight and lower on key crosses.

BNZ Markets Today

Risk sensitive markets remain well supported with limited economic data to provide markets with direction. The MSCI All Country World Index rose to an all-time high, supported by expectations for rate cuts by the US Federal Reserve. In Japan, the Nikkei-225 hit a fresh record high while the Euro Stoxx gained close to 1%. Meanwhile, the S&P reached a fresh intra-day record high, just below 6,500, before retracing. Global bonds moved lower in yield and the US dollar declined against G10 currencies.

BNZ Markets Today

In-line US CPI figures showing less impact of tariffs on goods prices than feared, supported lower US short-term rates. With relatively steady long-term rates, the Treasuries curve steepened. US equities show solid gains to fresh record highs, while the USD is broadly weaker.

BNZ Markets Today

The new week has begun with little change in US equities, a small fall in US Treasury yields and a modest broad-based lift in the USD. President Trump has been at the centre of various news flow – his name appears a record-breaking ten times in this report – but none of which has been particularly market moving.

BNZ Markets Today

US equities ended last week on a firm note. The S&P gained almost 1% and closed just below the record high from the end of July, having fully retraced the post labour market selloff. There was limited first tier data or other catalysts to provide the market with direction. The Euro Stoxx index was little changed while the Nikkei gained 2.0% after the US agreed to end ‘stacking’ on universal tariff and cut car levies. Global bonds closed higher in yield and absolute moves in currency markets were small.

BNZ Markets Today

Market movements have been modest, with US equities showing a moderate fall, slightly higher Treasury yields and modest net movements in currencies, with the largest move being a stronger GBP after a hawkish BoE policy update. The NZD is little changed near 0.5940.

BNZ Markets Today

Global equity indices are broadly higher. The S&P’s advance has almost fully retraced the decline after the weak services ISM print. President Trump said Indian imports will be subject to an additional 25% tariff, for its ongoing purchases of Russian oil, on top of the 25% rate they already face. The Swiss President was not successful in lowering the 39% tariff rate after travelling to Washington to present a proposal to US officials. Global bond markets are modestly higher in yield and the US dollar is weaker against G10 currencies.

BNZ Markets Today

US equities show a modest fall, weakening after a poor ISM services survey but the impact on Treasuries and the USD was minimal. US Treasury yields are slightly higher led by the short end, while the USD is flat for the day. The NZD is close to 0.59, as it was this time yesterday.

BNZ Markets Today

After a spicy end to markets last week following the shocking downward revision to US non-farm payrolls and Trump’s sacking of the head of the Bureau of Labor
Statistics, the new week has begun with mixed results. US equities have bounced back strongly, with the S&P500 up 1.3% with an hour left of trading – investors seeing dips in the market as a buying opportunity and not fearing signs that the labour market might be much weaker than previously thought. European markets have also bounced back, although not to the same extent, with the Euro Stoxx 600 index up 0.9%

BNZ Markets Today

There were large moves across global markets into the weekly close. US labour market was weaker than expected, and combined with a soft manufacturing ISM, contributed to weaker risk sentiment and falls across equity markets. Rising geopolitical tensions between US and Russia also impacted risk appetite. US equity futures, which had already fallen close to 1% ahead of the data, extended lower with the cash index closing 1.6% lower. Stocks in Europe and Asia also declined with the Euro Stoxx notably closing nearly 3% lower. The US dollar fell sharply, global rates declined, and oil prices dropped ahead of the OPEC+ meeting.

BNZ Markets Today

The S&P reached a fresh intra-day record high, amid solid earnings from big technology companies, but retraced earlier gains in afternoon trading. Major European stock markets declined with the Euro Stoxx index falling 1.3%. President Trump said he would delay the higher rate of reciprocal tariffs on Mexico by 90 days. The US is yet to announce agreements with several countries including Canada, India, China and Taiwan. Global bond markets are modestly lower in yield and the US dollar gained against G10 currencies.

BNZ Markets Today

As expected, the Fed kept policy on hold and there were only minor tweaks to the release. There was a nod to growth slowing, noting economic activity “moderated in the first half of the year”, previously characterised as expanding at a solid pace. “Uncertainty about the economic outlook remains elevated”, the statement removing the reference to uncertainty as having diminished. In a repeat, “labour market conditions remain solid” and “inflation remains somewhat elevated”.

BNZ Markets Today

The key market movement overnight has been a notable rally in US Treasuries, led by the long end of the curve, with rates down between 4-9bps. There have been a number of potential drivers listed by traders explaining the move. Tomorrow, the US Treasury will announce its debt-issuance plans and the expected strategy is one that keeps a lid on longer-term yields, by preferring to issue cheaper short-term debt. Traders might also be reducing short positions, ahead of the Fed’s monetary policy update tomorrow, where there is a chance of the door being opened for a September rate cut.

BNZ Markets Today

After digesting the weekend news of a US-EU trade deal, the net result has been a slump in the euro, a modest fall in European equity markets and a modest fall in European bond yields. The USD is broadly stronger, reversing last week’s loss. The NZD has sustained a move back below 0.60, while NZD/EUR is up ½% to 0.5150.

BNZ Markets Today

US equities ended last week on a positive note with the S&P hitting fresh all-time highs set against the backdrop of a solid earnings season and hopes for further trade deals as the August 1 deadlines looms. More than 80% of S&P 500 companies have exceeded profit estimates. The S&P traded up towards 6,400 and closed 0.4% higher on the day. European equities were little changed and major Asian indices retraced following recent solid gains. The US dollar was generally firmer against G10 currencies and global bond markets were stable.

BNZ Markets Today

Global equity markets have extended recent gains with the S&P trading to a fresh intra-day record high and major European and Asian stock indices advancing. The Nikkei posted a further strong gain closing 1.6% higher. Global bond yields are higher amid resilient US economic data. The ECB left rates on hold as expected and the market trimmed expectations for further easing. The US dollar advanced against G10 currencies.

BNZ Markets Today

Risk sensitive assets remained well supported amid optimism about the US reaching deals with key trading partners ahead of the August 1 deadline. A deal was announced with Japan yesterday and there is a growing expectation of a similar deal with the European Union. The developments contributed to further gains for global equities. The S&P reached a fresh record high near 6350 and the Euro Stoxx closed 1% higher. Asian stocks rose the most in a month. Treasury yields moved higher, and the US dollar was mixed against G10 currencies.

BNZ Markets Today

US equities recovered from a dip on the open and are little changed. The S&P is consolidating near record highs with limited economic data or other catalysts to provide direction. US Treasury Secretary Bessent said he will meet with Chinese officials next week, for a third round of trade talks, and he predicted several deals between now and the August 1 deadline. The US dollar is weaker against G10 currencies and treasury yields are lower.

BNZ Markets Today

US equities have started the week on a positive footing with the S&P trading to a fresh intra-day record high. The index extended recent gains above 6300 with limited first-tier economic data to provide the market with direction as investors look ahead to a busy week for corporate earnings. US equities have traded to new record levels despite uncertainty whether US trading partners will be able to reach a deal before the latest tariff deadline on 1 August. In Europe, the Euro Stoxx index closed modestly lower.

BNZ Markets Today

Markets closed last week on an uneventful note, with US equities remaining flat around record highs, slightly lower US Treasury yields and modest net moves in the currency market during the Friday night session.

BNZ Markets Today

Stronger than expected US economic data have supported US equity markets and the USD, without doing any harm to Treasuries.

US retail sales figures were stronger across the board, with the headline index rising 0.6% against an expected gain of 0.1%. Stronger auto sales inflated the result, but even excluding these, core sales were robust. The data are in nominal terms, so includes the impact higher inflation, but the market still saw the data as conveying a picture of robust spending, despite policy uncertainty and high mortgage rates.

BNZ Markets Today

There was a bit of intraday volatility when government officials suggested President Trump had expressed support for the idea of firing Trump at a discussion with Republican lawmakers. This saw weaker equities, lower Treasury yields and a weaker USD. However, less than an hour after the media had caught onto this story, Trump said he was not planning on doing anything, “I don’t rule out anything, but I think it’s highly unlikely. Unless he has to leave for fraud.” Trump said he had spoken to lawmakers about the concept of firing him and asked what they thought, “Almost all of them said I should. But I’m more conservative than they are”. Markets subsequently reversed course.

BNZ Markets Today

US CPI data were close to market expectations, confirming that the impact of higher tariffs is beginning to lift inflation. Headline inflation rose 0.3% m/m, driving the annual increase up three-tenths to 2.7% while the ex-food and energy measure rose 0.2%, seeing the annual increase tick up to 2.7%. For items where tariffs have been imposed, there was visible sign of higher inflation, including toys, household furnishings, sports equipment and appliances all inflating at multi-year highs.

BNZ Markets Today

There has been a muted market reaction to Trump’s weekend threat to raise tariffs on the EU and Mexico. US equities are higher and US Treasury yields show a minimal lift in rates. The USD is broadly stronger, although movements have been modest. The NZD has sustained the modest fall during NZ trading hours.

BNZ Markets Today

Friday ended the week as it began, with President Trump issuing more threats to raise tariffs. This saw equity markets trade on a more cautious note and contributed to a modest broad-based lift in the USD. Bond investors weren’t impressed with the messaging and global rates rose, seeing the US 10-year rate close near the top end of its weekly trading range, above 4.4%. Risk appetite is likely to remain suppressed as the new week begins after Trump threatened higher tariffs for the EU and Mexico over the weekend.

BNZ Markets Today

Newsflow remains light, with nothing in the way for global equity markets to probe fresh record highs. US Treasury yields are slightly higher. Against a backdrop of higher risk appetite, commodity currencies have outperformed, with the AUD the best performing.

BNZ Markets Today

Newsflow has been light, but equity investors continue to pay little regard to Trump’s tariff threats, with US and European markets stronger overnight. US Treasury yields have reversed course, with modest falls. Net currency movements have been small and there was little market reaction to the RBNZ’s no-change policy decision yesterday.

BNZ Markets Today

Markets have settled somewhat after the initial shock yesterday of Trump starting to announce the punitive tariffs that will be in place from 1 August for countries where trade negotiations haven’t gone well. US equities are flat, US Treasury yields are higher, and the curve is steeper again. Net currency movements have been modest, with the AUD a clear outperformer after the RBA shocked the market by not cutting rates.

BNZ Markets Today

Trump’s tariff policy is back in the headlines, as the key 9-July date approaches, which was the deadline for the end of the pause in reciprocal tariffs that were announced on Liberation Day. Ahead of that date, threats of higher tariffs have begun to be rolled out and markets are not liking it, although the new deadline for negotiation is now 1-August. US equities are lower, US Treasury yields are higher with a steeper curve, and the USD is broadly stronger, with the NZD probing sub -0.60.

BNZ Markets Today

Last week ended on a quiet note, with US markets closed for the Independence Day holiday. There was a whiff of risk aversion in the air as investors looked towards 9-July, the day when the 90-day pause in Trump’s reciprocal tariff policy expires. Ahead of this date, a number of tariff-related stories were doing the rounds on Friday, with follow-up reports during the weekend.

BNZ Markets Today

A stronger than expected US employment report sent US rates higher across the curve. Markets closed early ahead of the US Independence Day holiday, with the S&P500 up 0.8% to a fresh record high. The USD is broadly stronger, seeing the NZD nudge down to 0.6065.

BNZ Markets Today

The S&P remained well underpinned and recorded a new record high after President Trump announced a trade deal with Vietnam. European equities also gained with the Euro Stoxx index advancing 0.7%. UK gilts and the pound fell on fiscal concerns, which weighed on the long end of government bond markets, including US treasuries. Brent crude prices increased almost 2% to US$69, ahead of an OPEC+ meeting this weekend, which is likely to see an increase in production quotas.

BNZ Markets Today

US equities are little changed with the S&P starting the month near flat and consolidating near a record high. Treasury yields increased, and the US dollar rebounded from earlier losses to be little changed. President Trump’s tax and spending bill has passed the Senate. The Congressional Budget Office has estimated the bill would increase the deficit by $3.3tn over the next decade.

BNZ Markets Today

US equities are ending the month on a positive footing with the S&P trading to a fresh intra-day record high. Investor sentiment has been underpinned by signs of progress on trade negotiations and the prospect of easier policy monetary policy from the Federal Reserve. Bloomberg reported that the European Union is prepared to accept a trade deal, that includes a universal 10% tariff on most exports, with some key exemptions. The S&P has gained close to 10% in the June quarter outperforming the Euro Stoxx, which has risen less than 2%, and other major global indices.

BNZ Markets Today

The S&P closed at fresh record high on Friday in a whipsaw session. Equities dipped temporarily after news that President Trump had terminated trade discussions with Canada in response to the country’s planned implementation of a digital services tax targeting American companies. A late rebound saw the S&P close 0.5% higher aligning with the solid gains made by European indices. Treasury yields were little changed, and the US dollar was mixed against G10 currencies.

BNZ Markets Today

With geopolitical risk no longer a market focus, US equities have continued to push higher, while speculation that the next appointed Fed Chair will be dovish and announced early, supported a backdrop of lower US rates and a weaker USD.

BNZ Markets Today

Market conditions are relatively calm with only modest price action, with a lack of newsflow and the investors believing that the war between Iran and Israel is largely over for now.

BNZ Markets Today

Global equity markets have made solid gains following the ceasefire between Israel and Iran which has provided optimism for a lasting resolution to the conflict. Brent crude fell towards US$67 per barrel and below the level ahead of Israel’s attacks on Iran’s nuclear sites. The S&P looked past weak consumer confidence data, and advanced more than 1%, with the index closing in on its all time high reached back in February. Treasury yields declined weighing on the US dollar.

BNZ Markets Today

After the US became directly involved in the conflict between Iran and Israel, following its surgical bombing of three nuclear sites in Iran on Sunday, there was focus on how markets would react at the start of the new week. Risk assets opened weaker and oil price spiked higher, but in overnight developments, there has been a complete reversal of that move.

BNZ Markets Today

The further escalation in the Middle East conflict over the weekend, after the US attacked Iranian nuclear sites, increases the likelihood of a further spike in oil prices and will weigh on investor risk appetite. Brent crude futures had dipped towards US$74 on Friday, amid increased hopes for a diplomatic solution for the Iran-Irael conflict but subsequently rebounded towards US$76. The S&P closed modestly lower while the Euro Stoxx advanced 0.7%. The US dollar was firmer against a basket of developed market currencies. Treasury yields declined following dovish comments from Fed Governor Waller.

BNZ Markets Today

In the lead up to the US Federal Reserve’s rate decision this morning, US equities traded modestly higher and treasury yields were lower across the curve. Currency markets were generally stable, although the Swedish krone fell sharply, after the Riksbank cut rates to 2.0% and signalled more easing is possible. Brent Crude prices are little changed around US$76 per barrel, having recovered from an earlier dip, after President Trump said Iran had reached out and wants to negotiate.

BNZ Markets Today

Risk sentiment is weaker as the US has become more involved in the Israel-Iran conflict. Global equities are weaker, US Treasury yields are slightly lower, and the USD is broadly stronger, with the NZD falling towards 0.60.

BNZ Markets Today

The new week began with market focus on the Middle East, amidst the fourth day of missiles firing between Israel and Iran. With Israel’s aerial attack dominating, the conflict not spreading to include other countries, and oil infrastructure not targeted, the market has already adopted a sanguine view and risk assets have recovered.

BNZ Markets Today

There was a risk-off tone across financial markets which began on Friday afternoon after Israel launched unilateral strikes against Iran’s nuclear programme. The subsequent retaliation by Iran further escalated the conflict. The S&P declined 1%, after recovering off the session low, on hopes of a de-escalation via diplomatic channels. However, the US-Iran meeting in the weekend was cancelled, and with no sign of a let-up in hostilities, risk sensitive assets face a challenging start to the trading week. Gold prices advanced above US$3430 pre ounce.

Outlook for Borrowers: Post August MPS

The Reserve Bank of New Zealand (RBNZ) reduced the Official Cash Rate (OCR) by 25bp to 3.0% at the Monetary Policy Statement (MPS) on Wednesday. The rate cut was expected by economists and was close to fully discounted by pricing in the overnight index swap (OIS) market. However, the decision was reached by a 4-2 majority. The dissenting Committee members preferred to reduce the OCR by a larger a 50bp adjustment.

Outlook for Borrowers: July update

The outlook for NZ interest rates is being driven by a complex interplay between mixed domestic economic data, and heightened policy uncertainty amid trade tensions and geopolitical risks. The level of uncertainty was highlighted by the Reserve Bank of New Zealand (RBNZ) at the May Monetary Policy Statement (MPS), when the Official Cash Rate (OCR) was reduced by 25bp to 3.25%.

Tariffs unhelpful, but primary prices firm

The latest spin of the US tariff roulette wheel has occurred with a host of new rates foisted upon different countries to be implemented later this week.