New Zealand Dollar: Growth check and scope for dovish repricing – BBH

Brown Brothers Harriman's Elias Haddad notes that New Zealand's Q2 Gross Domestic Product (GDP) growth is expected to decelerate significantly. The slowdown is attributed to increased fuel prices, uncertainty, and declining house prices, which dampened domestic demand. Despite this, leading indicators indicate a recovery is on the horizon in Q3.

The Reserve Bank of New Zealand (RBNZ) anticipates a relatively low peak in policy rates compared to the swaps curve, creating an opportunity for a dovish adjustment that could negatively impact the New Zealand Dollar. The RBNZ projects that the policy rate will peak at around 3.25% in 2028, still below its nominal neutral range of 2.3% to 4.1%.

Despite this, the New Zealand Dollar has slipped, trading near the 0.7140 level during the Asian session on Monday, though it failed to gain momentum. Currently, the currency is down nearly 0.25% for the day, trading just above mid-0.7100s. Similarly, the USD/JPY pair shows some buying interest at the start of a new week, approaching the 154.00 mark during the Asian session, reversing a portion of Friday's losses.

However, the pair remains within a range established over the past week and near a near-seven-month low, as traders await key central bank events this week. Meanwhile, Pi Network (PI) continues its recovery, trading above $0.097 after two consecutive weekly gains. Despite this positive trend, technical indicators suggest a tentative recovery, but the presence of overhead Exponential Moving Averages continues to hinder further gains.

Canada's August Consumer Price Index figures will be closely watched when released on Monday, providing insights into price pressures following the Bank of Canada's September 2 meeting, where officials maintained the interest rate steady at 2.25%, in line with analyst expectations.