BNZ Research

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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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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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.

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.

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

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

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.

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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.

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.

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.

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.

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.

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.

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.

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.