RBNZ Signals Rate Cuts, NZD/USD Falls Over 1.3% in a Day

The Reserve Bank of New Zealand's latest rate decision kept the OCR at 5.5% but the statement clearly noted that "if inflation continues to fall, a rate cut in August is a reasonable expectation" — a dovish tone that far exceeded market expectations. Following the decision, NZD/USD fell sharply with an intraday maximum decline of 1.3%, touching 0.5985, a near one-year low. New Zealand's swap market shows markets are now fully pricing in a 25 bp cut in August, with total expected easing for the full year rising to 75–100 bps. Analysts believe that if economic data continues to weaken, a larger 50 bp cut from the RBNZ cannot be ruled out.