NZD/USD to power ahead as higher interest rates finally make an impact – ANZ

NZD/USD was the biggest gainer on Tuesday and it continues to edge higher on Wednesday. The kiwi is set to continue edging higher aided by a combination of USD weakness and its own credentials, economists at ANZ Bank report.

Inflation forecasts upgraded

“While the reaction seems delayed and had been haphazard, the sharp move higher in short-end interest rates looks to now be impacting. Yesterday we changed our OCR call; we now expect six more hikes – one at each meeting between now and August, taking the OCR to 2%.”

“Perhaps, more importantly, we have also lifted our inflation forecasts. In an environment of still well-anchored inflation expectations, that speaks to the RBNZ being ahead of the pack and cyclically higher rates, which should benefit the NZD.”