BNZ Research

NZD Corporate FX Update

The NZD remains out of favour, with a clear downward trajectory evident throughout the second half of the year. We attribute much of this decline to domestic factors, particularly the elusive NZ economic recovery and the prolonged monetary policy easing cycle.

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Wings clipped on Kiwi

Global and domestic forces have driven the NZD down to fresh lows, demanding a revision to our projections. We pare back the extent of projected US dollar decline against all the majors, while NZD crosses include the impact of the now well-acknowledged disappointing recent NZ macro performance.

Our new year-end target for NZD/USD is 0.59. From a current depressed level, we still see a clear pathway for a positive medium-term trajectory, although next year’s target has been cut to 0.63.

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NZD/AUD: Crikey mate, check this out

The NZD/AUD cross rate has been plunging of late, driven down by collapsing NZ-Australia rate spreads. Earlier this year we noted our short/medium-term model estimates were sitting around 0.85. Those model estimates now sit around 0.83-0.84. Based on fundamental forces, the recent plunge in the cross rate to below 0.88 has been fully justified.

Risks to the outlook are two-sided. There are strong reasons for the cross rate to trade lower, including downside momentum, lower fair value estimates, and the likelihood of RBNZ rate cuts. Risks remain that the cross rate could break decade-lows, with little technical support below 0.87.

However, a potential recovery could come if the RBNZ is less aggressive with cuts and forthcoming NZ data improves. While downside risks to forecasts exist, longer-term investors may see value at current levels. Based on the negative interest rate spread between NZ and Australia being sustained, the near-term headwinds for the cross rate remain formidable.

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Trending slowly upward

SEEK job ads have maintained an upwards trend over the three months to October. There is a hint that the pace of improvement has slowed a touch over recent months, but headway has been made. October job ads are 6.7% higher than a year ago. It’s slow progress off a low base with jobs ads still 46.4% below their 2022 peak.

Ongoing Downturn Persists

The services sector in New Zealand continues to exhibit contraction, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for October was 48.7 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). Although this was 0.4 points higher than September, the sector remains entrenched in contraction, which has now been the case for 20 consecutive months. The October result was also still well below the average of 52.8 over the history of the survey.

BusinessNZ's CEO, Katherine Rich said that while the level of activity in the sector has risen for the second consecutive month, the fact that none of the sub-index results managed to get above 50.0 during October shows it is still tough times for service-based businesses. For the sub-index results, ^ctivity/Sales (48.9) recorded its highest value since January 2025, although New Orders/Business (49.5) slipped slightly from September. In addition, Employment (48.8) rose 0.9 points from September, recording its highest value since March 2025.

The proportion of negative comments for October (54.1%) was down from September (58.0%) and August (59.6%). Negative comments received show the services sector reporting weak demand and reduced customer spending due to the economic downturn, cost-of-living pressures, and low confidence. Rising operating costs, delays, competition, and project cancellations are further reducing sales, slowing activity, and creating cashflow challenges.

BNZ's Senior Economist Doug Steel said that "if one was trying to find any positive traces in a still broadly weak sector, the activity/sales index rose to its best outcome since January this year and its second-best month since February last year. But 48.9 is not strong".

Signs of life

New Zealand’s manufacturing sector showed increased expansion during October, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for October was 51.4 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 1.3 points higher than September, but still below the average of 52.4 since the survey began.

BusinessNZ’s Director of Advocacy, Catherine Beard, said that after two months of flatlining activity in the sector, at least October showed more signs of life.
"Four of the five sub-index values were in expansion during October, lead by kew Orders (54.9), which showed its highest level of expansion since August 2022. This was followed by Production (52.0) and Finished Stocks (51.3). In contrast, Employment (48.1) remained in contraction, which has now been the case for six consecutive months".

The proportion of negative comments from respondents stood at 54.1% for October, down from 60.2% in September and 58.1% in August.
Manufacturers reported a lift in orders and improved demand, helped by seasonal activity, new customers/products, and signs of economic confidence returning. Many also noted better efficiency and productivity, with process improvements and automation supporting stronger sales and output.

BNZ’s Senior Economist Doug Steel said that "the lift to 51.4 from September’s 50.1 isn’t large, but it has moved the right way. The October result sees the PMI now boasting four consecutive months above the breakeven 50 mark for the second time in three years".

Another turning point?

Today’s labour market data broadly confirmed our view of the world. Namely, that the deterioration in the labour market is reaching its end but that it will be quite some time before any sort of buoyancy returns.

The problem for those looking for work is that the labour market lags the real economy. Only now is the economy starting to show the first signs of life. But it will be a while before employers are confident enough to take on more staff especially, when in many cases, the staff that are already employed are underutilised.

Business optimism elevated

ANZ’s business opinion survey continues to foretell a marked improvement in economic activity. It’s been doing so for over a year now. We are comfortable with our view that activity will soon turn the corner but we can’t help but think the initial pace of the expansion will disappoint many. Consistent with the ANZ survey, we do believe annual GDP growth can climb to around 3.0% but that’s likely to be towards the tail end of 2026 rather than any time soon.

Shaking off the sideways trend

SEEK job ads are showing further signs of life. Across the September quarter, ads lifted 2.8% q/q. With each passing month, an upturn in the trend becomes more compelling. It is important to remember that the level of job ads is still almost 50% below the 2022 peak. But it is another sign the worst for employment may be behind us.

Annual CPI expected to peak in Q3

Broadly speaking, today’s selected prices for September support our view that annual CPI peaked in Q3 and will ease in Q4. The monthly prices were a touch on the softer side relative to our priors and set a lower base going into Q4. It provides early evidence that the current bout of inflation is slowly starting to unwind. This should help ease some concerns around inflation persistence, with RBNZ Chief Economist Conway noting yesterday it is nerve wracking with CPI close to the top of the target band.

Headwinds Continue

The services sector in New Zealand remains mired in contraction, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for September was 48.3 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). While this was 0.7 points higher than August, the sector has now been in ongoing contraction for 19 consecutive months. The September result was also still well below the average of 52.9 over the history of the survey.

BusinessNZ's CEO, Katherine Rich said that it was a case of a different month but the same story for the sector. For the sub-index results, Activity/Sales (47.8) and New Orders/Business (49.6) did pick up from August, but still remained in contraction. Employment (47.8) experienced increased contraction, while Stocks (50.6) was the only sub-index to show expansion during September.

The proportion of negative comments for September (58.0%) was down on August (59.6%) and July (58.5%). Negative comments received show that the services sector continues to struggle under weak economic conditions, with low consumer confidence, reduced discretionary spending, and high living costs curbing demand. Businesses report falling sales, fewer new contracts, and cautious clients delaying projects amid rising costs and ongoing uncertainty about the broader economy.

BNZ's Senior Economist Doug Steel said that "in isolation, the combined PMI/PSI activity indicator warns of economic growth struggling to gain traction".

Hovering below expansion

New Zealand’s manufacturing sector again remained just below expansion levels for September, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for September was 49.9 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was exactly the same result as August but below the average of 52.4 since the survey began.

BusinessNZ’s Director of Advocacy, Catherine Beard, said that while it was good to see the September result not showing increased contraction from August, the sector remains agonizingly close to returning to expansion mode.

"Despite the sector remaining in technical contraction, four of the five main sub-index values were in expansion during September. This was led by deliveries of Raw Materials (51.1), followed by Finished Stocks (50.4) and New Orders (50.3). Production (50.1) managed to keep its head above water, but Employment (47.5) was the primary reason for the September PMI result not being able to advance to expansion".

The proportion of negative comments from respondents stood at 60.2% in September, compared with 58.1% in August and 58.6% in July.
Manufacturers continue to report soft demand, with many noting lower order volumes, cautious customer spending, and ongoing uncertainty across domestic and export markets. Rising costs, weak confidence, and competitive pressures are squeezing margins, leaving many manufacturers in a holding pattern as they wait for clearer signs of recovery.

BNZ’s Senior Economist Doug Steel said that "the lack of improvement in the PMI risks a slower recovery than we have penciled in. Improvement is needed to be consistent with the pace of growth we forecast for the second half of this year".

RBNZ cuts OCR to 2.50%

For more than a year we have been forecasting the Official Cash Rate (OCR) to go below 3% by the end of 2025. It now is, with the RBNZ cutting the OCR by 50bps to 2.50% today.

QSBO supports lower rates, mixed signals on how far

For those that are inclined to think the economy needs the RBNZ to lower rates, the QSBO does not stand in the way of that view. But on the extent of the reduction required, there were mixed messages. It doesn’t make the RBNZ’s decision tomorrow easy.

Optimistic business outlook

Businesses remain firmly optimistic and have positive expectations for activity, according to the latest ANZ Business Outlook survey. Firm’s own activity expectations for 12-months ahead increased from 38.7 to 43.4 in September, with lifts broad based across all sectors. Based on historical relationships, this would imply annual economic growth a touch over 3%. That is consistent with our forecasts for the next 12 months. It is reassuring to see more evidence of businesses expecting recovery.

Job ads slowly starting to turn?

Job ads are starting to show some tentative signs of life, albeit from a very weak base. The latest 3-months (Jun – Aug) show a 1.9% lift in the number of ads relative to the previous 3-months (Mar – May). They also nudged back above year-earlier levels for the first time since late 2022.

NZ Underperformance Highlighted

We have long touted that GDP contracted in the second quarter of 2025. And going into today’s release we were the most pessimistic of local forecasters. But even we were surprised by the magnitude of the printed 0.9% decline for Q2.

Out of the worry zone

A sharp narrowing in the annual current account deficit came as no surprise today, but the extent of it sure was.
The current account deficit narrowed substantially to 3.7% of GDP in the year to June 2025. This was significantly smaller than the 4.8% of GDP that we and the market expected. The surprise was the extent of the revisions.

Less chance of inflation band breach

Selected price indexes for August were largely in line with expectations. While our Q3 CPI pick remains unchanged at 0.9% q/q and 3.0% y/y, the underlying decimals suggest there is now less chance that annual inflation goes above the 3% mark.

Services Sector Slump Persists

New Zealand’s services sector remains in an ongoing period of contraction, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for August was 47.5 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was 1.4 points lower than July, and well below the average of 52.9 over the history of the survey. The sector has now been in ongoing contraction for 18 months.

BusinessNZ's CEO, Katherine Rich said that the sector has now endured tough times for a year and a half, representing a very difficult period for many. For the sub-index results, both Activity/Sales (46.2) and New Orders/Business (47.8) slipped from July. Employment (48.3) did show a higher value than July, although still in long-term contraction.

The proportion of negative comments for August (59.6%) was up on July (58.5%) but down from June (66.2%). Service sector businesses reported widespread pressures from inflation, high interest rates, cost-of-living impacts, and weak consumer confidence, all contributing to reduced demand and spending. Other concerns included seasonal slowdowns, rising operating costs, supply chain disruptions, and government policy uncertainty.

BNZ's Senior Economist Doug Steel said that "across the economy, we still believe the general signs of a turning point are there. However, there is a very real risk any ensuing bounce takes longer than currently expected".

Struggling to move upwards

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

The seasonally adjusted PMI for August was 49.9 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was down 2.9 points from 52.8 in July and below the average of 52.5 since the survey began.

BusinessNZ’s Director, Advocacy Catherine Beard said that the August results suggest the sector has yet to turn the corner toward sustained growth. Although the reading was just shy of the no-change mark of 50.0, it still points to an industry struggling to regain its footing after an extended period of contraction through 2023 and 2024.

“Two of the five main sub-index values were in expansion during August. This was led by kew Orders (55.2), which encouragingly continues to trend upwards, reaching its highest level of activity since August 2022. Deliveries of Raw Materials (50.5) also remained in expansion, although down from July. In contrast, Production (46.6) fell 6.7 points from July, while Employment (49.1) and Finished Stocks (47.1) also recorded contraction.

The proportion of negative comments from respondents stood at 58.1% in August, compared with 58.6% in July and 65.5% in June. Negative comments indicated flat sales, with many customers cautious or inactive. Rising costs and global uncertainty are squeezing margins, leaving confidence low and recovery patchy.

BNZ’s Senior Economist Doug Steel said that “manufacturers are continuing to do it tough. We believe the general trend in the economy is still upwards, but indicators are often choppy around a turning point".

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.

Mixed NZD performance in October

• A dovish 50bp cut by the RBNZ caused only temporary NZD weakness in October
• The USD was broadly stronger, and NZD/USD fell just over 1%; the NZD recovered from a mid-month malaise and ended mixed on the key crosses
• JPY underperformed on political uncertainty and the BoJ remaining on the sidelines; NZD/JPY rose 3%

Roasted Kiwi

• For a second consecutive month, the NZD was a clear underperformer, struggling after a poor Q2 GDP outturn
• By month-end, the market had priced in the OCR falling just below 2.25%, implying at least another 75bps of cuts
• NZD/USD fell 1.7%, with the NZD showing even larger falls on NZD/AUD and NZD/EUR crosses, to multi-year lows

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

NZGB May-2036 tap syndication before year end

At the Budget in May, New Zealand Debt Management (NZDM) announced it expected to undertake three tap syndications of nominal lines in 2025/26. A NZ$6 billion tap of the May-2031 maturity took place in July. It was announced in the Monthly Tender Schedule this morning that a syndicated tap of the existing 15 May 2036 nominal bond will be undertaken before calendar year end. We expect the transaction will take place in November.

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RBNZ to lop another 25 points off its cash rate

Local market attention will this week be centred on Wednesday’s RBNZ Monetary Policy Statement. In short, we see the RBNZ cutting its cash rate a further 25 basis points to 2.25% and leaving the door open to a further reduction in February next year. Q3 retail sales, updates on business and consumer confidence, and October filled jobs are the key data releases but are all scheduled post the RBNZ meeting.

RBNZ November MPS Preview

Our central view is the Reserve Bank cuts the cash rate a further 25 basis points to 2.25% when it presents its November 26 Monetary Policy Statement (MPS). Moreover, we expect the Bank to leave the door open to a further reduction in February next year.

Monitoring progress

Forward looking indicators have been promising some improvement in activity. We will be monitoring the coming week’s data for more signs of the promise translating into actual activity. The NZD has pushed further below RBNZ assumptions raising questions around how fast and far inflation will ease ahead. Inflation expectations data is due for release tomorrow.

Labour market soft, but more signs of life appearing

Wednesday’s Q3 labour market data are expected to show a soft labour market, but with some signs of stabilisation. More monthly economic indicators are showing signs of life supporting our expectation of economic recovery. The RBNZ releases its Financial Stability Report on Wednesday, and the latest Crown accounts are due Thursday.

Q3 Labour Market Preview

We expect next Wednesday’s Q3 labour market data to show a soft labour market, but with some signs of stabilisation. We anticipate minimal employment growth, a nudge higher in the unemployment rate, and easing annual wage inflation. Business and consumer confidence updates are due this week and a few RBNZ speakers are on the circuit.

Inflation at top of the band

Today’s Q3 CPI data came in very close to expectations. It is unlikely to change any views on the outlook for monetary policy. Annual inflation rose to 3.0% from 2.7%, matching market, our, and the RBNZ forecasts. The quarterly details were marginally firmer than expected, but no major surprise. Core inflation is contained, although indicators remain in the top half of the RBNZ’s target band.

Trade tension, growth struggles, and CPI preview

Trade tensions between the US and China have flared again. Locally, the PMI and PSI warn that economic growth is struggling to gain traction. Population growth is slow, reflecting low net inward migration. The 2024/25 fiscal deficit came in narrower than Budget forecasts and Government net debt stabilised as a share of the economy. Q3 CPI seen lifting to 3.0%, subject to this week’s Selected Price Indexes for September. RBNZ’s Conway speaks on Wednesday.

RBNZ to cut

The RBNZ seems certain to cut the OCR at its Monetary Policy Review (MPR) on Wednesday. The question is how much? We see a 25bp cut, although a 50bp move is a clear risk. Economist polls and market pricing also favour a 25bp reduction, with some chance of a 50bp move. Tomorrow’s business survey has the potential to alter thoughts on the economy and outlook for interest rates. The Government Financial Statements for 2024/25 are to be published Thursday. The Minister of Finance speaks Friday.

October MPR Preview

The RBNZ seems certain to cut the OCR at its October Monetary Policy Review (MPR) next Wednesday. The key questions at this juncture are how much further and how fast? We see a 25bp cut in October and a low of 2.50% by year end. Risks are tilted to more easing, depending on the economic recovery. The QSBO is the remaining key release ahead of the MPR meeting. Dr Anna Breman has been announced as the new RBNZ Governor and will start at the Bank on 1 December.

Q3 looks better than Q2

We thought Q2 GDP was going to be weak and so it proved with last week’s data showing a 0.9% q/q contraction. A soft economy supports the case for the RBNZ to take the OCR lower which has long been our forecast. The extent of monetary easing will depend on the pace of economic recovery. A few more indicators support the notion of a Q3 bounce in activity. The QSBO is a key release just ahead of the next RBNZ meeting.

Recession deepens

Leading indicators still suggest the economy is turning the corner but, at the same time, imply that any real momentum is unlikely to develop until the last quarter of this year, at the earliest. Meanwhile, this week’s GDP is likely to deliver confirmation of plenty of spare capacity in the economy justifying the RBNZ’s intention to continue lowering the cash rate.

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.

BNZ Markets Today

There has been plenty of news overnight to digest. Oil prices are lower as a Ukraine-Russia peace deal looks closer than ever. US data released were soft and there was a report that Trump is most likely to select the most dovish candidate as the next Fed chair. The USD is broadly weaker and the 10-year rate has slipped below 4%. The NZD has pushed higher but has underperformed against EUR, GBP and JPY ahead of the RBNZ’s meeting today.

BNZ Markets Today

Newsflow has been light. The only market movement of note has been an extension of Friday’s rally in US equities, with another solid gain to kick off the new week. Currencies and bonds show only small movements, and the NZD continues to languish just over 0.56.

BNZ Markets Today

US equities rebounded on Friday after a week characterised by erratic price action. The S&P closed 1% higher following comments from a top Federal Reserve official that raised expectations for a December rate cut. Investors remain cautious after the wild swings in equity markets in recent sessions. The S&P has its biggest intraday reversal on Thursday (3.6%) since the Liberation Day volatility in April. Despite the rebound on Friday, the index fell almost 2% last week and is down 3.5% so far this month. US treasuries rallied and the US dollar index was stable with mixed returns for G10 currencies.

BNZ Markets Today

US equities pared earlier gains and have shown a sharp, steady decline in the two hours leading up to the publication of this report. A lift in the US unemployment rate resulted in lower yields, with the shift in risk sentiment adding to that move. Commodity currencies have underperformed overnight, seeing the NZD fall back to just below 0.56.

BNZ Markets Today

The most notable market movement has been broad gains in the USD, driving the NZD below 0.56. US equities are flat ahead of Nvidia’s earnings announcement, while Treasuries continue to trade a tight range.

BNZ Markets Today

Risk sensitive assets remained under pressure overnight after the weak Asian session yesterday. There is growing caution from investors ahead of Nvidia’s earnings and about the elevated valuations in the artificial intelligence sector. There are also concerns about the required capital expenditure which is reliant on issuing huge amounts of debt. The S&P is lower in afternoon trading and there have been large falls across European and Asian markets. The VIX index of implied S&P volatility, increased to 26, the highest level since the liberation day turmoil in April.

BNZ Markets Today

The new week has begun with small net changes in US equities and Treasuries and modest changes in currencies. The NZD trades this morning at 0.5670, up slightly overnight but down slightly from last week’s close.

BNZ Markets Today

US equities rebounded from sharp decline and closed near to flat. After a weak session the previous day, the S&P had initially fallen more than 1% before recovering. Investors have cited high valuations for technology firms and reduced expectations for easing by the Federal Reserve as headwinds for the equity market. The were heavy losses for European and Asian markets earlier in the day. US treasury yields increased while the US dollar was stable on the major crosses.

BNZ Markets Today

The end of the US government shutdown has been met with a decent fall in US equities and slightly higher US rates, as expectations for Fed easing fade. Despite that backdrop, the USD is broadly weaker. The NZD has pushed up to 0.5670 and NZD/AUD recovered all of its loss following the strong Australian labour market report, with the AUD underperforming overnight.

BNZ Markets Today

Market movements have been modest in the absence of any breaking news.

The end of the US government shutdown is imminent later today, when House lawmakers vote on a bill that has already been approved by the Senate and President Trump. There will be some delays in reopening over coming days so the economic hit will endure a little longer, before activity bounces back. By next week we might see the return of some official economic releases. The government will be funded through 30 January, while select agencies will be funded through the whole fiscal year. Some work will be required to avoid another shutdown in just over two months.

BNZ Markets Today

US equites are marginally lower in afternoon trading but have largely maintained the gain from the previous session on optimism the longest US government shutdown is coming to an end. Stocks in Europe extended higher. The Euro Stoxx index advanced more than 1%. Global bond yields are broadly lower, and gilts outperformed after softer than expected labour market data. The US dollar is broadly weaker against G10 currencies. Oil prices are higher with Brent crude trading above US$65 per barrel.

BNZ Markets Today

Risk sentiment was underpinned at the start of the trading week amid expectations for deal that would end the longest ever US government shutdown. The US Senate took a step towards re-opening the government after a group of Democrats crossed party lines to endorse a compromise plan. The Senate will need vote on the deal, which is not currently scheduled, then the House will need to pass the bill, before President Trump signs it into law. The political developments provided a boost to global equities. The Euro Stoxx closed 1.8% higher and the S&P has gained 0.7% in afternoon trading while credit spreads have tightened.

BNZ Markets Today

The S&P declined by close to 1.5% on Friday, before staging a recovery, after Senate Democrats scaled back their demands to end the government shutdown. Investor sentiment had been impacted by signs of weakness in the US labour market and falling consumer confidence. Technology stocks remain in focus amid concerns about high valuations. Major equity indices in Europe and Asia closed lower. Global bond markets were mixed while the US dollar was broadly weaker against G10 currencies.

BNZ Markets Today

US Treasuries reversed the previous day’s selloff, with the market supported by some soft US labour market reports, with rates down about 5-8bps for the day. US equities are down 1%. The risk-off mood has seen the NZD and AUD underperform, both falling about 0.6% overnight.

BNZ Markets Today

There has been a decent selloff in US Treasuries overnight following stronger than expected US economic data and the US Treasury’s quarterly refunding announcement. The 5-7bps lift in yields hasn’t perturbed the US equity market, with a decent rebound after yesterday’s hefty loss. Currency markets show little response to higher US rates. The NZD is a touch stronger overnight and over the past 24 hours.

BNZ Markets Today

A risk-off tone has pervaded markets, driving down global equities and supporting bond markets. JPY has outperformed and the USD is broadly stronger, with the NZD probing a fresh seven-month of 0.5655 and Bitcoin has fallen to its lowest level since June, trading around the USD101k mark.

BNZ Markets Today

Risk sensitive assets are little changed. The S&P is close to flat in afternoon trading and there was limited reaction to the manufacturing ISM which continues to point towards sluggish activity in the sector. Treasury yields are higher and the recent advance in the US dollar index has taken a breather. Oil prices were stable, following the weekend announcement that OPEC+ planned to pause output increases in the first quarter of 2026, after raising production in December. Brent crude is trading close to US$65 per barrel.

BNZ Markets Today

US equities ended the month on a positive note. Earnings season remains in focus for investors. The vast majority of the 60% of S&P firms that have reported results so far have exceeded analyst estimates according to Bloomberg. The S&P closed 0.3% higher extending gains for October to 2.3%. Other global equity indices were mixed. The Nikkei surged 2% to a fresh record while European stocks closed lower. Price action in global bond markets was subdued, and the US dollar extended its recent move higher.

BNZ Markets Today

The rally in US equities has paused after investors reduced expectations for an interest-rate cut in December. This follows comments from Federal Reserve Chair Jerome Powell at the FOMC yesterday that a cut at the next meeting was far from a done deal. The S&P is modestly lower in afternoon trade while the Euro Stoxx closed near flat. The dollar extended its post-FOMC rally, particularly against the yen, which weakened after the Bank of Japan held interest rates steady.

BNZ Markets Today

There were small net changes across global asset markets ahead of the US Federal Reserve’s rate decision this morning. US equity indices were marginally higher, and treasury yields increased 2-3bp across the curve. An initial advance for the US dollar index faded leaving major FX pairings little changed. Commodity currencies including the AUD and NZD made small gains, alongside the Canadian Dollar, with the Bank of Canada rate cut having little impact. Copper prices hit a record high in London amid optimism on US-China trade talks and challenging supply dynamics.

BNZ Markets Today

The S&P has registered a fresh intra-day record high. Equities are supported by solid corporate earnings and a new deal from OpenAI and Microsoft which saw the latter company’s valuation reach US$4 trillion. Details have emerged about the potential US-China trade deal. Under the framework the US will roll back some tariffs if China reduces the exports of the chemicals that produce fentanyl.

BNZ Markets Today

US and Asian equity indices have reached fresh record highs, after encouraging signs from negotiations between the US and China, ahead of a leaders summit this week. Equities have been supported following benign US CPI data, which was released on Friday, and reinforced expectations for a 25bp rate cut when the Federal Reserve meets later this week. The US dollar is little changed and treasury yields are modestly higher. Gold prices fell below US$4,000 an ounce on diminished haven demand.

BNZ Markets Today

A surge in oil prices, after the US imposed additional sanctions on Russia, has contributed to higher treasury yields as the market looks ahead to CPI data this evening. The CPI report is the first major economic release since the government shutdown began. Risk sensitive assets are generally firmer. Equity indices in Asia and Europe closed higher and US equities are currently in positive territory. The AUD and NZD gained against the US dollar while moves in major currencies were modest.

BNZ Markets Today

Risk sensitive assets have traded with a soft tone overnight. Outside of the FTSE, which gained after softer than expected UK CPI data, major equity indices have declined. Stocks in Asia fell and the Euro Stoxx closed 0.8% lower while US equity indices have registered losses in afternoon trading. Absolute moves across currency and rate markets have been small with limited economic data or other catalysts to prove direction. Oil prices sustained recent gains with Brent crude near US$62.70 per barrel.

BNZ Markets Today

The key market move overnight has been a slump in gold and silver prices following their explosive run higher. Global equity markets continue to push higher, with many bourses reaching new highs. Global rates are lower, with the US 10-year rate nudging down to 3.95%. Net currency moves have been modest apart from the yen weakening after Takaichi won the vote to become Japan’s PM.

BNZ Markets Today

Newsflow has been light but the mood in equity markets have been positive, with investors shaking off the temporary bout of pessimism that pervaded late last week. The S&P500 is currently up over 1% and the Euro Stoxx 600 index closed 1% higher.

BNZ Markets Today

Risk sentiment turned positive on Friday from the European open, driving a modest gain for US equities and resulting in the US 10-year rate rising from a low of 3.93% to a NY close of 4.01%, up 7bps from the NZ close. Currency markets showed modest movements, with the NZD range trading and closing the week at 0.5725.

BNZ Markets Today

US equites are modestly weaker and US Treasury yields are lower, with risk sentiment weakening during the middle of the NY trading session. The 2-year Treasury rate is probing three-year lows while the 10-year rate has fallen below 4%. Currency movements have been modest, but commodity currencies have slightly underperformed overnight. The NZD trades at 0.5735 and NZD/AUD has sustained a lot of the gain seen in the wake of yesterday’s softer Australian employment report.

BNZ Markets Today

Newsflow has been light. US equities are up slightly, paring strong gains after the open. The US 10-year rate took another peak below 4% but yields are now modestly higher. Currency movements have been modest and the NZD is down a touch around 0.5710.

BNZ Markets Today

It has been a rollercoaster ride for markets with a big swing in the USD and US equities, reflecting gyrations in risk sentiment. US equities show a modest gain, recovering from a sharp loss. A stronger USD from yesterday afternoon drove down the NZD to a fresh six-month low below 0.57 before recovering. The US 10-year rate dipped below 4% overnight and currently trades at 4.03%.

BNZ Markets Today

Cooler heads are prevailing after the US-China trade war escalated on Friday, and this has contributed to some recovery in risk assets. US equities have recovered more than half of Friday’s loss and the AUD is the best major FX performer after being the worst performer on Friday. The NZD shows a small gain. The US bond market is closed for the Columbus Day holiday, but the futures market shows a small lift in yields.

BNZ Markets Today

Risk sentiment took a major dive during the overnight Friday trading session as the US-China trade détente abruptly ended. US equities tumbled, alongside a strong rally in US Treasuries that sent the 10-year rate towards 4%. FX safe-havens JPY and CHF outperformed, while the AUD was whacked the hardest. The NZD fell to around 0.5720 and was weaker on the key crosses apart from a decent bounce in NZD/AUD to 0.8835. Oil prices tumbled while gold recovered back above USD4000. US-China trade war escalation sets the scene for some volatile trading conditions through the rest of the month.

BNZ Markets Today

Without any obvious triggers, it has been a bad night for investors, with lower US and European equities, higher global rates and even gold prices are notably weaker. The USD is broadly stronger, and the NZD has fallen 1% from the NZ close to 0.5740.

BNZ Markets Today

Newsflow has been light again. US equities have recovered after their one-day dip and US Treasury yields show small movements. Overnight, the NZD is the best performing currency we closely follow, recovering a lot of its loss seen after the RBNZ’s dovish 50bps cut yesterday, trading around 0.5780.

BNZ Markets Today

US equities have broken a winning streak and are modestly weaker overnight. Weaker risk sentiment has supported Treasuries, with the 10-year rate down 4bps to 4.11%. The USD is broadly stronger and the yen remains under pressure. NZD has weakened towards 0.58. All eyes will be on the RBNZ policy update today, with the market split between views of a 25 or 50bps rate cut.

BNZ Markets Today

There has been no economic news, but plenty of political news to keep the market on edge, including significant moves in Japan’s equities, bonds and currency following the shock selection of the new LDP leader. Overnight, France was inflicted with more political turmoil. The US government remains in shutdown mode. NZ is a beacon of stability by comparison, with the NZD trading at its high for the day around 0.5840, and gains on most crosses, including a 2% surge in NZD/JPY.

BNZ Markets Today

Last week ended on an uneventful note, not helped by the US government shutdown that resulted in delay in publishing the key US employment reports. US equities were little changed, and US Treasury yields pushed higher, partially reversing the fall in rates earlier in the week. The USD was broadly weaker in overnight trading, but moves were modest. The NZD pushed a little higher, closing the week around 0.5830.

BNZ Markets Today

Newsflow has been light and markets show only modest movements amidst a US government shutdown. US equities show little change and US Treasuries have traded narrow ranges, with a small flattening bias. The USD is slightly stronger overnight. The NZD has traded a narrow range and is currently 0.5820. Oil prices are lower for a fourth consecutive day.

BNZ Markets Today

After a soft tone for risk sentiment in Asia, as the US government shutdown took effect, the S&P has recovered from an initial dip on open to be little changed. European equity indices registered solid gains. A weaker than expected ADP private payrolls reading was consistent with other data indicating the labour market is slowing and contributed to lower bond yields. The US dollar was mixed against G10 currencies and oil prices extended the recent decline. Brent crude traded towards US$65 per barrel.

BNZ Markets Today

US equities are little changed overnight, with hopes for a last-minute deal to avoid a government shutdown fading, which would create uncertainty and delay the publication of key economic releases. The S&P wasn’t impacted by weaker-than-expected consumer-confidence data and oscillated in a narrow range. Oil prices extended the recent decline on concerns about increased OPEC+ supply - Brent crude traded towards US$67 per barrel. There was limited movement across government bond markets, and the US dollar is modestly weaker.

BNZ Markets Today

US equities retraced from earlier gains amid concerns about the risk of a US government slowdown. Prediction markets are implying a 70% chance of shutdown which could delay the publication of key economic data. This includes the September labour market report, which is scheduled for the end of the week, creating uncertainty for investors. These fears contributed to lower treasury yields. There was divergent price action in commodity markets with gold extending higher while oil prices fell on supply concerns. The S&P retraced from earlier gains and is 0.2% higher in afternoon trading.

BNZ Markets Today

After declining for three consecutive session, US equities rebounded into the end of last week with data pointing to resilience in the US economy. The market looked past President Trump’s announcement of fresh industry-focused tariffs, including a 100% duty on patented pharmaceuticals. The S&P closed 0.6% higher. Major European indices made solid gains with the Euro Stoxx index advancing 1%. Sovereign bond markets were little changed, and the US dollar was modestly weaker.

BNZ Markets Today

Stronger than expected US economic data overnight drove higher US rates, as the market pared scope for easier monetary policy, and broad gains in the USD. US equities are weaker for the third successive day. The NZD lurched below technical support of 0.58 while NZD cross movements have been contained.

BNZ Markets Today

Markets have traded with a more cautious tone overnight without any obvious driver, seeing modest falls in US equities and modestly higher US Treasury yields. The USD is broadly stronger and the NZD has underperformed, heading down towards support at 0.58 and with fresh multi-year lows on NZD/AUD and NZD/EUR crosses.

BNZ Markets Today

Global asset markets were largely stable overnight with Federal Reserve Chair Powell’s first speech since the FOMC last week providing few fresh clues on the outlook for monetary policy. Major US stock indices are lower and consolidating after the recent run up to record highs. The Euro Stoxx gained 0.6% while major Asian indices were mixed. Global government bond markets were little changed overall while the US dollar was softer at the margin against G10 currencies.

BNZ Markets Today

US equities and gold have powered up to fresh record highs in the wake of the Fed restarting the easing cycle last week. Fed speakers have been doing the rounds, with the turn of the more hawkish FOMC members overnight and, coincidentally or not, US Treasuries have traded with a cautious tone, with rates nudging higher. European currencies have outperformed, and the NZD is a touch stronger.

BNZ Markets Today

US equities closed last week near record highs with sentiment aided by the prospect of further easing by the US Federal Reserve. The S&P ended the session 0.5% higher. Major stock indices were flat in Europe and the Nikkei declined after the Bank of Japan (BoJ) indicated plans to reduce its equity portfolio. The positive sentiment towards risk sensitive assets extended to credit markets where US high-grade spreads over treasuries reached 72bp, a fresh 27-year low.

BNZ Markets Today

In the aftermath of the US Fed’s rate cut yesterday, US equities are probing fresh record highs. For US Treasuries and the USD, it has been a case of buy the rumour, sell the fact, with yields extending higher and the USD making further broad gains, supported by stronger US data. The NZD has extended losses overnight, following the softer than expected GDP print yesterday, trading below 0.59.

BNZ Markets Today

Global asset markets were largely in a holding pattern in the run up to the US Federal Reserve’s rate decision this morning. US equities and European equities were little changed, while treasury yields were higher, driven by the front end of the curve. Currency markets were stable. The US Dollar index remained above the multi-year low from early July having approached this level in recent sessions. There was limited currency market impact from UK inflation data and the Bank of Canada rate cut.

BNZ Markets Today

Markets continue to prepare for a dovish Fed policy update in less than 24 hours, with US Treasury yields edging lower and a broadly weaker USD, despite stronger than expected US retail sales. The euro has been a key beneficiary, rising to a four-year high, while the NZD has edged up towards 0.60.

BNZ Markets Today

Ahead of the Fed’s near-certain rate cut later this week, markets appear to already be factoring in the restarting of an easing cycle, with US equities rising to a fresh record high, alongside a modest fall in US Treasury yields and a broadly weaker USD.

BNZ Markets Today

The S&P ended flat on Friday with the index consolidating near all-time highs after a solid week of gains. European markets were also little changed while stocks in Japan, South Korea and Taiwan closed at record levels. Weaker than expected US consumer confidence data did little to alter expectations for the FOMC this week. Government bonds are higher in yield with the largest moves seen in European markets. Currency markets were quiet. Oil prices were steady as US threats to sanction Russian crude didn’t materialise. Gold remained near a record high with prices holding close to $3,650 a troy ounce.

BNZ Markets Today

An in-line US CPI report and a jump in initial jobless claims drove lower US rates and a weaker USD, with the 10-year rate dipping below 4% at its low for the day. The record-breaking run for US equities has continued. NZD/USD has recovered to 0.5975 and is higher on the key crosses apart from a further nudge down in NZD/AUD.

BNZ Markets Today

Softer than expected US producer price inflation supported the case for the Federal Reserve to cut rates next week. Expectations for easier monetary policy supported risk sensitive assets with the S&P trading to a fresh all time high. Rising geopolitical tensions, after Poland shot down Russian drones which had crossed into its territory, had limited impact on sentiment. Major European indices closed were near flat while Asian markets advanced. Treasuries rallied and the US dollar is little changed. Brent crude prices increased almost 2% to US$67.60 per barrel.

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.

Outlook for borrowers: September update

NZ interest rates have declined to new lows for the cycle against a backdrop of weak domestic activity and expectations that inflation will return to target over the medium term. The dovish pivot by the Reserve Bank of New Zealand (RBNZ) at the August Monetary Policy Statement (MPS) was the initial catalyst for the move lower. Recently, weak GDP data for the June quarter raised concerns about the contours of the economic recovery and contributed to a further leg lower in rates across the yield curve.

Dipping dairy dynamics

Dairy prices have been generally strong in 2025 and the national income flows from it have been robust. However, the dynamics are changing with the global dairy market now clearly softening. A surge in global milk supply is putting material downward pressure on prices.

Export incomes to support activity

Primary sector export returns have been stellar over the past year. Major sectors like dairy, beef, lamb, and kiwifruit have seen significant gains. While not every sector has enjoyed strong gains, the sector heavy weights have driven overall agricultural exports to $53.0b in the year to August 2025, some $7.5b higher than a year earlier.