New Zealand Dollar: Jobs data and RBNZ hiking path – ING

Francesco Pesole of ING anticipates New Zealand's Q2 labor data to align with the Reserve Bank of New Zealand's May projections, which suggested one to two rate hikes in Q3. He leans towards a hike in September or October, with growing confidence in a September move. Pesole predicts NZD/USD to stay near 0.585-0.590, with a year-end target of 0.59 and 0.60 becoming more achievable.

New Zealand's Q2 labor market data, released tonight, is expected to show only 0.1% quarter-over-quarter employment growth, with unemployment rising from 5.3% to 5.4%. This outcome would match the RBNZ's May projections, implying one to two hikes in Q3. Since the July hike, markets have priced around 20-25 basis points of tightening for the September meeting.

ING has long favored a September or October hike but has recently increased conviction for a September move. This is due to markets potentially overestimating the tightening cycle, with 75 basis points priced in by February. Some committee members may not have fully agreed with the RBNZ's hawkish stance in May, leading to a potential smaller 50 basis points tightening cycle.

This suggests a possible earlier September hike and a pause thereafter. NZD has been a top performer since the Fed meeting, outperforming AUD following a dovish CPI release. NZD/USD may remain around the 0.585-0.590 range for now, but a dovish September hike could trigger a correction and pave the way for AUD outperformance against NZD. The year-end target for NZD/USD stands at 0.59, with 0.60 becoming increasingly attainable.