BNZ Research

Iran Conflict and the NZD

• The Iran conflict is a major geopolitical event and should not be under-estimated
• Market reaction to date on equities, oil, currencies assumes an optimistic outcome
• Every day the Strait of Hormuz is closed for shipping, the global shock potential increases
• Even if the war is “won”, Iranian militants can indefinitely cause havoc
• Still too soon to be ripping up forecasts, but the balance of risk is heavily skewed to the downside for risk assets like the NZD

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

NZD Corporate FX Update

In our last report at the end of January, we held back from upgrading our NZD projections, even as the currency surged past our end-Q1 target of 0.60. We anticipated a period of consolidation, which indeed played out through February. March began with significant conflict in the Middle East, causing the NZD to retreat.

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

NZD Corporate FX Update

The NZD experienced a strong turnaround from late November, with only a brief interruption in late December and early January, before resuming its upward trend to reach a six-month high above 0.60. This rally has been driven by both global and domestic factors.

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

Economy grows, slowly

Whatever today’s Q4 GDP growth turned out to be it was always going to come with a proviso that it was a different world late last year compared to what we are now living in. Historical data are of much less importance compared to the news flow from the Middle East.

Deficit begins to widen again

Today’s Balance of Payments data was always going to take a backseat relative to the conflict in the Middle East. The current account deficit widened to 3.7% of GDP in the year to December 2025, slightly larger than the 3.5% deficit recorded in the year to September. It draws to an end the material narrowing trend in the current account deficit over the past three years.

Annual inflation to approach 4.0%

We were waiting for today’s selected price indexes in case there were any major surprises in the data that might derail the set of inflation forecasts that we were about to publish. As it turns out there were a couple of things that caused us to adjust our view but, in the end, they did little to change the bigger picture which is being driven by rising oil prices.

Back to Contraction

The services sector in New Zealand fell back into contraction during February, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for February was 48.0 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was 2.7 points lower than January and below the average of 52.8 over the history of the survey.

BusinessNZ's CEO, Katherine Rich said that the sector's rebound into expansion only lasted two months, with a February result similar to levels of contraction seen towards the end of 2025. All main sub-index results were in contraction, with Stocks/Inventories (46.7) displaying the largest level of contraction, followed by Employment (47.2)
The proportion of negative comments for February was 56.4%, which was down from January (58.7%) but up from December (50.4%). Negative comments received outlined weak economic conditions, high living costs, inflation and interest rates as reducing consumer spending and demand for services. Seasonal holiday effects, low confidence, staffing constraints, rising costs and broader uncertainty also contributed to softer activity.

BNZ's Senior Economist Doug Steel said that "alas, today’s PSI suggests the economy is recovering at a slower pace than we might have expected. The PSI comes as a real disappointment given that Friday’s Performance of Manufacturing Index (PMI) was relatively upbeat".

NZ recovery under the pump

Let’s get this straight, based on current information the world is not going to end. Fuels are expensive and are getting more so. Supply is heavily restricted. But demand will fall and alternative supplies will rise. And then, one day, the Strait of Hormuz will reopen. The problem is that this takes time. So, in the interim it is imperative that businesses, households and governments alike prepare for the worst while hoping for the best knowing that no matter what, a significant adjustment process is under way.

Consistent Performer

New Zealand’s manufacturing sector showed a consistent level of expansion during February, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).
The seasonally adjusted PMI for February was 55.0 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was almost identical to the January result of 55.1, and above the average of 52.5 since the survey began.

BusinessNZ’s Director of Advocacy, Catherine Beard, said the February result marked the first time since mid-2021 that activity had recorded three consecutive months at 55.0 or higher.

"All five sub-index values were again in expansion during February. This was led by the two key indices of New Orders (57.6) and Production (56.7), followed by Deliveries (51.0). Employment (50.4) dipped from January, but still remained in slight expansion.

The proportion of positive comments from respondents stood at 55.5% in February, up from 47.7% in January but down from 57.1% in December. Manufacturers reported more orders, enquiries, and sales, supported by stronger export demand and improving conditions in certain sectors. Some also noted a growing pipeline of work and a gradual improvement in business confidence.

BNZ’s Senior Economist Doug Steel said that "recent economic data have taken a backseat relative to the conflict in Middle East. While it is too early for the PMI to capture any of these impacts, the February outturn well above the breakeven 50 mark is a useful starting point".

Q4, 2025 GDP preview

We have been increasingly wary of the fragility of the economy’s recovery. Acknowledging recent events in the Middle East, we focus here on what next Thursday’s Q4 GDP figures may show. On that, our wariness was further heightened after last week’s disappointingly weak building work put in place figures.

New Zealand at a Glance

Not that long ago the big question was could New Zealand gain economic momentum in 2026? Nearly every indicator that we currently look at provides confirmation that the recovery is underway. Moreover, there is every reason to assume it can be sustained. The bigger question now is how fast it can grow before current spare capacity is eroded and inflationary pressures climb enough that a tightening cycle is kicked off. We think there’s water to go under the bridge for a few months yet but by year’s end rates will be on a clear uptrend.

BNZ & SEEK Employment Report: Bending upwards

Job ads continued to trend higher in January. Combined with the upward revision to December, it is encouraging to see consecutive months of improvement in the number of roles advertised on SEEK. Total ads for the last three months (Nov – Jan) are up 4.4% on the previous three months (Aug- Oct).

RBNZ Holds, Plays Straight Bat

We thought the RBNZ would hold its cash rate at 2.25% today, remove the previously projected possibility of easing further, and take a cautious approach to projected rate hikes down the track, but still modestly strengthen that outlook. That is exactly what the Bank delivered today.

Annual inflation to ease, but how fast?

Selected prices for January were close to our expectations on net. Being the first month of the quarter, they provide our first clear insight into Q1 CPI. Working through the unders and the overs, there was nothing in today’s data to alter our +0.5% q/q and +2.7% y/y pick for Q1 CPI. They support our view that headline annual inflation will ease in Q1 following the lift to 3.1% in Q4.

Momentum maintained

The services sector in New Zealand remained in expansion for the first month of 2026, according to the BNZ – BusinessNZ Performance of Services Index (PSI). The PSI for January was 50.9 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was 0.8 points lower than December and below the average of 52.8 over the history of the survey.

BusinessNZ's CEO, Katherine Rich said that despite the January result showing a lower level of activity than December, at least the sector remains on the right side of the ledger after such a lengthy period of contraction. Two of the five sub-index values were in expansion for January, with Activity/Sales (54.2) leading the way, followed by New Orders/Business (51.8). Stocks/Inventories (49.7) fell back into contraction, while Employment (49.1) dropped further compared to December.

The proportion of negative comments for January was 58.7%, which was up from December (50.4%) and November (52.9%). Negative comments received showed the services sector still reporting low confidence, with Christmas–New Year holidays and seasonal shutdowns leading to fewer enquiries and a prolonged post-holiday slowdown. These effects were compounded by high living and operating costs.

BNZ's Senior Economist Doug Steel said that "the big question to end 2025 was whether the economy may be turning. Data since then has given us confidence that recent positive momentum can be sustained. The economy is growing".

Healthy expansion continues

January's activity for New Zealand’s manufacturing sector again showed a healthy level of expansion, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for January was 55.2 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). Although this was 0.9 points lower than December, it was still above the average of 52.5 since the survey began.

BusinessNZ’s Director of Advocacy, Catherine Beard, said that the January result starts the year in the right direction after a lacklustre 2025.

"All five sub-index values were again in expansion during January. This was led by the two key indices of production (56.6) and New Orders (56.4), followed by Deliveries (53.3). Employment (52.9) recorded its third straight monthly expansion, which had last occurred in the first few months of 2025.

Despite the PMI remaining in expansion during January, the proportion of positive comments from respondents stood at 47.7% for January, down from 57.1% in December and 54.4% in November. A number of manufacturers reported weak demand, citing Christmas and summer holiday shutdowns disrupting production, skewing orders, and extending the seasonal shutdown into the new year.

BNZ’s Senior Economist Doug Steel said that "the January PMI provides further evidence that the economy has finally turned the corner. It is consistent with our forecasts and a breadth of indicators suggesting decent economic growth".

Labour market lags economic cycle

The themes of today’s mass of labour market data were much as we outlined in our preview. First, it is too early to see major changes in the labour market as it tends to lag the economic cycle. Second, there are more signs of improvement in the details. Within a decimal point or two the headline figures broadly confirmed our priors.

Inflation worryingly high

The chances of a 2026 rate hike rose significantly today with annual CPI inflation rising to an eighteen month high of 3.1%. We think our new laser-focussed-on-inflation RBNZ Governor will not be amused.

Lull in the upswing?

The upswing in SEEK job ads saw a hint of stalling into the end of 2025. After 13 consecutive monthly gains on a trend basis, job ads eased 0.3% in December. This unwound November’s gain. Latest trend estimates can get revised, so interpretation requires some caution. But the hint of a flattening trend at a still relatively low level is important to monitor. If it were to continue, it would raise downside risks to forecasts of employment growth ahead.

Expansion

The services sector in New Zealand experienced expansion for the first time since February 2024, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for December was 51.5 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was 4.3 points higher than November, but still below the average of 52.8 over the history of the survey.

BusinessNZ's CEO, Katherine Rich said that the December result ended the longest run of contraction for the sector since the survey began, stretching to 21 months. Three of the five sub-index values were in expansion, with kew Orders/Business (52.5) leading the way after four months of consecutive contraction. This was followed by Activity/Sales (52.2) and Stocks/Inventories (51.9). Despite the return to overall expansion, Employment (49.6) still remained in slight contraction.

The proportion of negative comments for December stood at 50.4%, but this was still below November (52.9%) and October (54.1%). Negative comments received showed the services sector constrained by weak demand and confidence, high living and operating costs and Christmas-related shutdowns. On the flip side, positive comments saw the services sector supported by seasonal Christmas and summer demand, improving consumer confidence driven by lower interest rates, stronger tourism, new contracts and bookings, and early signs of broader economic recovery and investment activity.

BNZ's Senior Economist Doug Steel said that "the PSI is not strong, but the positive direction of travel is important to acknowledge. Especially when the PSI is joined with the large jump in last week’s PMI, the combined index (PCI) signals firmly positive GDP growth into the end of 2025 and establishes forward momentum heading into the New Year".

Another quarter of 3% annual inflation?

A couple of the headlines from today’s selected prices looked benign enough on the inflation front, but they were more than offset by chunky gains in some of the details. The key takeaway is that today’s figures support our view that next Friday’s Q4 CPI is likely to print above the RBNZ’s November MPS forecasts.

Manufacturing ends year on high

December's activity for New Zealand’s manufacturing sector showed its highest level of activity since December 2021, according to the latest BNZ –BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for December was 56.1 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 4.4 points higher than November, and above the average of 52.5 since the survey began.

BusinessNZ’s Director of Advocacy, Catherine Beard, said that the December result was a very welcome way to end the year, with 8 of the 12 months showing some level of expansion.

"All five sub-index values were in expansion during December. This was led by kew Orders (59.8), which was at its highest level of activity since July 2021. Production (57.4) also showed a significant lift in activity, while Employment (53.8) continued to recover after a number of months exhibiting declines during 2025.

The proportion of positive comments from respondents stood at 57.1% for December, which was up from 54.4% for November and 45.9% in October. Manufacturers saw improved activity, mainly due to seasonal Christmas demand, which lifted domestic sales, orders, and short-term workloads. This was supported by firmer business and consumer confidence, increased export and forward orders, and some gains from new customers, products, and infrastructure-related work.

BNZ’s Senior Economist Doug Steel said that "the PMI is positive for Q4 GDP calculations and points to good momentum heading into the New Year. At face value, it suggests upside risk to the positive view we already have for manufacturing and near-term GDP growth forecasts".

QSBO Indicates Strengthening Economy

We are moderately, and happily, surprised by the strength revealed in NZIER’s December Quarterly Survey of Business Opinion. At face value it shows that momentum in New Zealand’s economic recovery is gaining a real head of steam and, accompanying that, inflationary pressures are already building in a meaningful way.

Fairly flat February for the NZD

• NZD/USD traded a tight range of 1½ cents in February, ending the month with a small fall
• AUD and CNY clearly outperformed, seeing NZD crosses against these down about 2-2½%
• Lingering risk of war in the Middle East and a dovish-hold by the RBNZ contributed to the NZD’s lagging performance

A sharp recovery for the NZD

• The NZD and AUD enjoyed very strong gains from mid-Jan as the USD collapsed and a global reflationary thematic prevailed
• Investors’ loss of trust in US policy exaggerated market movements alongside the end of the rules-based international order
• Global equity markets stretch to fresh highs; US Treasuries range-bound; NZ-global rate spreads increase

Outlook for Borrowers: Post February MPS

The Reserve Bank of New Zealand (RBNZ) held the Official Cash Rate (OCR) steady at 2.25% at the Monetary Policy Statement (MPS) on Wednesday. This outcome was expected by economists and fully reflected in market pricing. The decision was reached by consensus. The updated modelled OCR track has a low point of 2.25% removing the marginal easing bias from November. The December quarter average was increased by 10bp to 2.38%, implying a greater chance of a rate hike towards the end of this year. The projected track for next year was also revised higher and the OCR reaches the Bank’s 3% long term neutral estimate by late 2028.

An historical stock take

It’s a huge week ahead for New Zealand data. By the end of the week we will have a fairly comprehensive summary of the state of the New Zealand economy including its growth, external accounts and inflation. Sure the data are very old news but it would be wrong to completely dismiss them because they will provide great insight into the starting point for the economy as we try to come to grips with the impact of the war in the Middle East.

Inflation up, growth down

The New Zealand economy is amid a fragile recovery. A war in the Middle East and an oil shock are the last thing it needs. But those are the cards that have been dealt. So, all bets are now off. We’ll have to revise up our inflation forecasts and down our growth forecasts. So will the central bank but what is much less clear is what it all means for monetary policy.

Terms of trade to the rescue

Middle Eastern chaos will dominate the news front in the week ahead. It will put upward pressure on inflation and downward pressure on growth. How much and for how long is anyone’s guess. Meanwhile, back in NZ, we learnt today that the trend recovery in the labour market continues, albeit at a slow pace. Later in the week we’ll get greater insight into the state of the construction sector, a fiscal update and more news on the state of the external sector.

Rapid recovery for retail

We were looking for today’s Q4 retail trade data to show a modest gain and add evidence of the economic recovery. The 0.9% q/q lift in retail sales volumes did this and more. On the back of the strength in today’s data, we have nudged up our Q4 GDP pick one tenth to 0.6% q/q. Business and consumer confidence surveys are due later this week.

RBNZ Seen On Hold This Week

The RBNZ is expected to hold the cash rate at 2.25% at Wednesday’s MPS. Assuming the unanimously expected outcome occurs, focus will quickly turn to the Bank’s language and forward projections. We expect the possibility of easing to be removed from the Bank’s published interest rate track, such that the low remains at 2.25% through to the December quarter. From there on in we would expect the track to be around 10 basis points higher than previously published. Growth indicators have been generally positive, including the PMI and PSI, although today’s transactions data disappointed. Inflation expectations have nudged higher. Tomorrow’s Selected Prices will give some guidance to Q1 CPI.

RBNZ Monetary Policy Preview

We believe the RBNZ will have to raise its cash rate in September of this year but, given the uncertainties that prevail, we do not expect it to express that intent when it releases its February 18 Monetary Policy Statement. We expect the possibility of an easing to be removed from the Bank’s published interest rate track such that the low remains at 2.25% through to the December quarter. From there on in we would expect the track to be around 10 basis points higher than previously published. Higher than expected growth and inflation are likely to be acknowledged but there is likely to be some push back on current market pricing.

Labour Market Preview: Too Soon?

Wednesday’s Q4 labour market data is forecast to show the first quarterly employment growth in 18 months and a halting in the drift higher in the unemployment rate. Annual wage disinflation is seen nearing an end, as improving labour demand meets some difficulty in being satisfied. Commodity price updates and December building consents data are also due.

Forging ahead

Our view of the world can be summed up in three sentences:
• Growth is picking up toward potential
• This will eventually result in an improvement in labour market conditions
• Which, in turn, will see upward pressure on inflation and the cash rate move back toward neutral with reasonable haste once the need is confirmed.

Optimism to kick off the New Year

Resumed data flow over the last week suggests that New Zealand ended 2025 on a more optimistic note. Combining the messages of the QSBO, PMI and PSI reports, we see upside risk to our near-term growth projections. For the week ahead, the main data focus will be Friday’s Q4 CPI. Headline inflation is expected to print at 0.4% q/q and 2.9% y/y, a couple of ticks higher than the RBNZ’s November MPS forecast.

Happy New Year?

We head into a brand-new year quietly confident it will prove to be a much better one than any of the past three years. We say this mindful that we did not share the consensus view that calendar 2025 would prove to be filled with optimism. But we are quick to point out that “better” and “good” are two very different things. While we expect economic expansion in every quarter of the year, we are still very aware that conditions will remain tough for many. Both households and businesses will continue to struggle with elevated costs, and the household sector is unlikely to see much joy on the job front until much later in the year.

BNZ Markets Today

Global equity indices declined and oil prices jumped after explosions in the world's largest gas field ahead of the Federal Reserve’s interest-rate decision. Brent crude prices increased to $110 a barrel, reversing an earlier decline, after Israel struck Iran’s South Pars gas field, which Tehran shares with Qatar. Treasury yields increased as producer prices accelerated and the US dollar gained set against the weak risk backdrop with NZD dipping below 0.5820 before recovering. The CAD was little changed after the Bank of Canada kept rates steady with oil sensitive currencies outperforming.

BNZ Markets Today

The lift in risk appetite noted in yesterday’s report has been sustained, with some further modest follow through. US and European equities are higher again, while global rates have pushed down a little further. Oil prices have been range bound over the past 24 hours, with Brent crude hovering near USD102 per barrel. The USD is broadly weaker overnight, and the NZD is up modestly to 0.5865. Another RBA rate hike has supported the AUD and sent NZD/AUD down to a fresh multi-year low.

BNZ Markets Today

Risk appetite is higher on optimism that the worst is over regarding the Iran conflict, while the reality is that nothing much has really changed on the battleground. Brent crude is lower at just over USD100 per barrel. US and European equity markets have gained, and global rates are modestly lower. Against a backdrop of a broadly weaker USD the NZD and AUD have outperformed.

BNZ Markets Today

Elevated oil pieces remain in focus as geopolitical tensions escalated, with Iran stepping up attacks in the Strait of Hormuz and the US moving to bolster its military presence in the region. Risk sentiment remained fragile, with global equities closing lower and credit spreads continuing to widen. The S&P erased an earlier near 1% gain as the US intensified strikes on Iran, raising the risk of further escalation. After initially rallying on soft economic data, treasuries lost momentum, with long dated yields underperforming. The US dollar made broad based gains with the soft risk tone contributing to weakness in the NZD and AUD.

BNZ Markets Today

Oil prices have surged again, weighing on risk sentiment. Brent traded above US$100 per barrel after President Trump said preventing Iran from acquiring nuclear weapons was a higher priority than oil prices. A record release of strategic oil reserves has failed to cap the rally, while concerns around private credit and fresh US tariff probes added to the risk off tone. Global equities sold off, with the S&P 500 down more than 1%, bond yields are higher, and the US dollar firmer against G10 currencies.

BNZ Markets Today

Risk sentiment is weaker as the Iran conflict continues at pace. While US CPI data were in line, US Treasury yields show a steady increase overnight on inflation fears as a result of the conflict. Oil prices are near the top end of their daily range despite the IEA agreeing to release 400m of barrels form strategic reserves. The USD is broadly stronger. The NZD has weakened towards 0.59 while the downturn in NZD/AUD continues deepen.

BNZ Markets Today

Risk sentiment has improved further following the tumble in oil prices, taking Brent crude to USD86 per barrel. Equity markets have rebounded. US Treasury yields show only small movement while European rates have played catch-up and are much lower. The USD is broadly weaker, while the AUD has been the top performer, sending NZD/AUD down to a fresh multi-year low.

BNZ Markets Today

Risk sentiment has improved considerably overnight, with market attention on the potential release of strategic oil reserves to relieve pressure on prices. Brent crude has plunged to just below $100 from yesterday’s surge. US equities show a modest fall, following the earlier plunge in futures and US treasury yields have fallen. The NZD and AUD have recovered yesterday’s losses and now show modest gains from last week’s close.

BNZ Markets Today

US equities fell following a weaker than expected US labour market report, while ongoing Middle East tensions drove another leg higher in oil prices. Brent crude pushed above US$92 per barrel despite efforts from US policymakers to boost supply. The S&P 500 closed 1.3% lower, with similar declines across European equities. Treasury markets saw whipsaw price action, while an early lift in the US dollar index faded into the weekly close.

BNZ Markets Today

The conflict with Iran has entered a sixth day and risk sentiment has soured a little further as the attacks around the gulf region continue and extend further afield. Brent crude continues to hover near recent highs, US and European equity markets are weaker, global rates have pushed higher and the USD is broadly stronger. The NZD has slipped back below 0.59 and the AUD is sub-0.70.

BNZ Markets Today

Global equities were mixed. US and European markets rebounded alongside a pullback in oil prices from recent highs, after the US said it is considering offering shipping assistance to help ease oil flows through the Middle East. US equities were supported by data pointing to strength in the services sector. Asian markets declined, led by South Korea, where the Kospi fell 12%, extending its two day decline to more than 18% amid an unwinding of leveraged positions. Treasuries were little changed and the US dollar was marginally weaker against G10 currencies.

BNZ Markets Today

Risk sentiment has soured overnight as investors focus on the widening conflict in the Middle East. Global equity markets have tumbled, and oil and gas prices have surged further. US Treasury yields are a little higher while European rates are much higher on inflation concerns. The USD is broadly stronger, and the NZD has fallen more than 1% to below 0.59.

BNZ Markets Today

Market attention has been fixated on the war in the Middle East following the joint US-Israeli missile attack against Iran and Iran’s retaliation. The biggest reaction has been for commodity markets and bonds, with higher oil and gas prices adding to inflation concerns, and the stronger than expected US ISM manufacturing survey adding to the mix. The USD is broadly strongly, with the AUD and CAD falling the least since last week’s close. The NZD has weakened to 0.5935.

BNZ Markets Today

Financial markets begin the week facing heightened uncertainty following US and Israeli strikes on Iran after the global close on Friday. The scale of the attacks, and Iran’s response, has exceeded expectations, pointing to further demand for safe haven assets and upward pressure on oil prices. With President Trump calling for regime change and signalling the risk of a protracted conflict, the range of potential outcomes has widened, and will likely weigh on risk sensitive assets.

BNZ Markets Today

There has been a mild risk-off vibe in overnight trading, with US equities falling and Treasuries well-bid. Rotation out of tech stocks has continued, while oil prices are higher as US-Iran nuclear talks reach a pivotal moment. The USD is broadly stronger overnight and the NZD has fallen to 0.5960.

BNZ Markets Today

Risk sentiment remains buoyant, driving further gains across global equities ahead of Nvidia’s results due after the US close. The S&P 500 is up more than 0.5% in afternoon trade, while European and Asian markets are also well supported. The Euro Stoxx has pushed to a fresh record high and the Nikkei closed over 2% higher. Sovereign bond and FX markets were little changed.

BNZ Markets Today

US equities have recovered some of yesterday’s losses, supported by a renewed rotation into IT stocks. Global rates have shown only minor movements. In currency markets, activity has been modest, except for a notable decline in the yen. The NZD is trading at 0.5970.

BNZ Markets Today

Risk sentiment is weaker as markets further digest the implications of the latest saga on Trump’s tariff policy. US equities have fallen around 1% and US Treasury yields are lower. Safe haven CHF and JPY currencies have outperformed, while commodity currencies are weaker.

BNZ Markets Today

The US Supreme Court has found President Trump exceeded his powers by imposing tariffs without clear Congressional authorization. The news contributed to a 0.7% gain for the S&P on the prospect of relief from tariffs. Treasury yields edged higher and the US dollar lost ground. The recent advance in oil prices stalled near a six-month high after The Wall Street Journal reported Trump is weighing a targeted strike on military or government sites in Iran to pressure Tehran into a deal, rather than a full-scale attack. The Euro Stoxx closed at a record high. European stocks are headed for the largest ever monthly inflow in February.

BNZ Markets Today

Rising geopolitical risk linked to US–Iran tensions weighed on global equities. The S&P slipped into negative territory in afternoon trade and is currently down close to 0.5%. Major European indices also retraced, with the Euro Stoxx closing around 1% lower. In contrast, sovereign bond and currency markets were little changed.

BNZ Markets Today

US equities, rates and the USD are all higher overnight, supported by stronger than expected second-tier US economic data, with markets, other than oil, showing little concern that war between US and Iran might be closer than realised, despite some progress earlier this week on nuclear talks. The NZD has sustained the fall seen in the wake of yesterday’s RBNZ’s policy update and is trading just below 0.60.

BNZ Markets Today

Market conditions have been somewhat choppy overnight. US equities are flat in early afternoon trading, recovering from earlier falls. The US 10-year rate is slightly higher after taking a peek below 4.02 overnight. Oil prices are lower after earlier gains, following tentative agreement on principles towards a US-Iran nuclear deal. The NZD is net flat, while GBP is the weakest of the majors following softer labour market data.

BNZ Markets Today

It has been a very quiet start to the week with many markets closed, including the US for Presidents’ Day and some key Asian markets due to the Lunar New Year holidays. Newsflow has been light.

BNZ Markets Today

US equities were little changed into the weekly close, stabilizing after the previous session's AI-driven selloff. Stocks gained initially after softer-than-expected CPI data which saw the market price in additional easing by the Federal Reserve for this year. However earlier gains for US stocks had faded by the close. Major indices in Europe were mixed while Asian equities closed lower. Treasury yields declined and the US dollar was marginally softer against G10 currencies although absolute moves were not large.

BNZ Markets Today

Newsflow has been light but risk appetite is weaker, and US equities are much lower, dragged down by lingering concerns in the IT sector. Currency movements have been modest but CHF has been the best performer overnight, while NZD/USD has pushed lower.

BNZ Markets Today

A much stronger than expected US employment report drove the US Treasuries curve flatter while US equities show a small gain. NZD/USD is little changed at 0.6060 while NZD/AUD falls below 0.85 as AUD rises to a three-year high above 0.71.

BNZ Markets Today

US equities are little changed. The S&P is consolidating just below record highs having fully recovered from the technology sector led weakness from last week. Softer than expected US retail sales supported the case for Fed rate cuts which contributed to a decline in treasury yields and a stronger yen. Global equities were mixed. Major European closed marginally lower while the Nikkei continued its post-election advance and gained a further 2%. The index closed at a fresh record high and is up 15% so far this year.

BNZ Markets Today

Newsflow overnight has been light. US equities have recovered further, driven by IT stocks. The US 10-year rate is little changed after a couple of unsuccessful attempts to sustain a push higher. The USD is broadly weaker, resulting in NZD pushing up to 0.6050.

BNZ Markets Today

US equity markets recovered late last week after several soft sessions. The Nasdaq Composite advanced close to 2%, partially reversing a 4.5% three day decline. Earlier weakness reflected investor concern about AI related disruption and the scale of tech sector capex, with four major technology firms projecting around US$650 billion of spending in 2026, mostly on data centre infrastructure. The US dollar declined against G10 currencies and treasury yields firmed.

BNZ Markets Today

US equity markets were mixed, with a continued rotation out of technology stocks. The S&P500 was little changed, while the Nasdaq extended its decline amid ongoing concerns about AI related disruption across software and data centric sectors. Sovereign bond markets were broadly stable, with US Treasury yields steady and yields declining modestly in Europe. The US dollar index edged higher. In commodities, metals prices remained volatile; gold briefly traded near USD 5,100 per ounce before retracing sharply.

BNZ Markets Today

There has been little news to digest overnight. A slump in tech stocks has dragged down the S&P500 while US Treasury yields have traded a tight range. Gold and silver prices have bounced strongly, while the USD is modestly weaker. The AUD has held onto its gain post the RBA rate hike yesterday while the NZD has pushed higher and trades this morning around 0.6040.

BNZ Markets Today

The Asian trading session kicked off in a volatile fashion, with gold and silver prices collapsing further, S&P500 futures opened on a weak note and the NZD dived below 0.60. This followed the choppy trading session on Friday following Trump’s pick of Kevin Warsh as the next Fed Chair.

BNZ Markets Today

The focus for markets late last week was President Trump’s decision to nominate Kevin Warsh as the next Chair of the Federal Reserve. Warsh, a former Fed Governor, will succeed Jay Powell when Powell’s term ends in May, subject to Senate approval. Warsh is seen as less supportive of deep rate cuts and more concerned about inflation than other candidates. The US dollar advanced, equities closed lower, and longer term Treasury yields were mixed. Volatility in precious metals continued, with gold prices falling below US$4,800/oz—a decline of nearly 15% relative to the previous session’s high.

BNZ Markets Today

There was a risk-off tone across global equity markets led by US technology stocks. Microsoft reported higher-than-expected spending on AI infrastructure, reigniting investor concerns about the vast capital expenditure by large US technology companies. The S&P is down 1% in afternoon trading having rebounded from a larger decline. News of a potential de-escalation in the Ukraine conflict contributed to the recovery off the session lows. There were limited moves for government bond markets while the US dollar is broadly firmer against G10 currencies. The AUD and NZD had large swings and traded in a wide range.

BNZ Markets Today

Ahead of the Fed’s policy update this morning, net market movements have been contained. An early rally in US equities faded and the US 10-year rate remain tightly range-bound. JPY and EUR are weaker overnight while the NZD has been steady in the low 0.60s.

BNZ Markets Today

US equities managed to look past a decline in consumer confidence and gained alongside global indices. The S&P is close to 0.5% higher in afternoon trading, with the index only marginally below the record high, set earlier in the month. The US dollar remained under pressure, and made broad based losses against G10 currencies, with the dollar index falling to a four-year low. US treasuries were little changed overall. Brent crude prices traded above US$67 on geopolitical concerns with a growing US military presence near Iran.

BNZ Markets Today

The new week kicked off with a stronger yen as the chance of official intervention overhung the market. The USD remained under pressure and the DXY index fell to a four-month low. The NZD recovered further towards 0.60. Global equity markets are stronger, while the US 10-year rate remain tightly range-bound.

BNZ Markets Today

Friday’s price action was a case of not much to see in equities and bond markets, but notable moves in commodities and currencies. Precious metals rose to fresh record highs and oil prices jumped over 3%. The USD was broadly weaker again, supporting further NZD appreciation to 0.5950, while JPY was the strongest major after some official price checks in response to yen weakness post the BoJ meeting.

BNZ Markets Today

Risk appetite improved after Trump announced a framework for a future deal on Greenland, resulting in stronger global equity markets, and the NZD and AUD outperforming. Gains have been extended overnight in the face of a broadly weaker USD, seeing the NZD pierce up through 0.59.

BNZ Markets Today

President Trump is again at the centre of market attention and his ruling out of force to acquire Greenland drove a bounce-back in global equity markets. There has been less impact on bonds and currency markets, with modest reactions. The US 10-year rate is little changed. The NZD weakened a little after making fresh highs overnight.

BNZ Markets Today

The fallout from rising US-EU political relations over the future of Greenland continues to reverberate through markets, with a meltdown in Japan’s bond market thrown into the mix. Global equity markets are weaker, global rates are higher, and the USD is broadly weaker. The NZD has become a safe-haven (lol), appreciating further to 0.5850 and up on most key crosses.

BNZ Markets Today

As markets opened for the new week there was keen interest in the response to President Trump’s weekend threat of new tariffs on eight European countries to persuade them to give up Greenland, alongside chatter that French President Macron was urging the EU to activate the powerful anti-coercion instrument, seen as a bazooka to hit US trade and investment into the region.

BNZ Markets Today

Risk sensitive assets were little changed into the weekly close. US equities ended the session with flat returns and global indices also registered small moves. Investor sentiment has remained upbeat with global equities consolidating near record highs and strong demand for credit amid record issuance in the first half of January. Treasury yields increased and the US dollar recovered off the session lows, after comments from President Trump appeared to decrease the chances of Kevin Hassett becoming the next Federal Reserve Chair, when Powell’s term expires in May.

BNZ Markets Today

US equities have rebounded from the weakness in the previous session. The S&P is up around 0.7% currently and there were decent gains for key European indices. Treasury yields increased after resilient labour market data and the US dollar gained against European currencies. Oil prices declined sharply, and precious metals also slipped from their record highs. Silver prices were volatile and declined close to 7% intraday before recovering.

BNZ Markets Today

US equities have fallen amid rising geopolitical tensions while metals prices have continued to advance. The S&P is down close to 1% in afternoon trading with limited impact from US retail sales and PPI data. The Nikkei extended its recent gains. It was reported that plans for a snap general election in February have been outlined to senior colleagues by Japan’s Prime Minister Takaichi. Metals including gold, silver, copper, and tin have hit record highs as investors seek alternatives to traditional assets. Global government bond market yields are broadly lower, and the US dollar index declined at the margin.

BNZ Markets Today

Global asset markets are broadly stable overnight. US core CPI undershot expectations but had limited lasting impact on US rates. Investor concerns about the investigation into Federal Reserve Chair Powell appeared to abate. Central bank governors from 11 institutions, issued a statement of support for Powell and the Fed's independence, which contributed to a reversal of the US dollar’s decline from the previous session. The S&P lurched to a fresh intraday record high after the CPI data but has since retraced. The potential for a snap election in Japan saw the Nikkei gain 3% and reach a record high while the yen and government bonds were under pressure.

BNZ Markets Today

This is the first Markets Today for 2026. We wish all our readers a Happy New Year.

US equity futures came under pressure in Asian trade yesterday after US Federal Reserve Chair Powell revealed that the Justice Department was threatening a criminal indictment over renovations of its headquarters. Powell said this was a consequence of its interest-rate policies, which raised further concerns about the central bank’s independence and the strength of US institutions more broadly, amid ongoing political pressure. The US dollar declined in response and precious metals gained on safe haven flows. Gold prices reached to a fresh record high above US$4600 per troy ounce.

Outlook for Borrowers: Post February MPS

The Reserve Bank of New Zealand (RBNZ) held the Official Cash Rate (OCR) steady at 2.25% at the Monetary Policy Statement (MPS) on Wednesday. This outcome was expected by economists and fully reflected in market pricing. The decision was reached by consensus. The updated modelled OCR track has a low point of 2.25% removing the marginal easing bias from November. The December quarter average was increased by 10bp to 2.38%, implying a greater chance of a rate hike towards the end of this year. The projected track for next year was also revised higher and the OCR reaches the Bank’s 3% long term neutral estimate by late 2028.

Buoyant beef

Beef prices have continued to lift over recent months. This is from already high levels and against some easing that typically takes place at this time of year. Beef is buoyant.

Not only are beef prices about a third higher than a year ago, but they are also up two thirds on two years ago. It is a significant lift. From a bit below average two years ago, prices are now substantially above average.