NZD/USD softens despite strong Q3 GDP – BBH

NZD/USD slipped to 0.5766 as markets digest New Zealand’s stronger-than-expected Q3 GDP growth of 1.1% q/q. Despite robust activity across most sectors, the Reserve Bank of New Zealand (RBNZ) maintains that the policy rate will likely remain at 2.25% through 2026, keeping the currency range-bound in the near term, BBH FX analysts report.

RBNZ signals policy steady through 2026

“NZD/USD is trading heavy near 0.5766. New Zealand real GDP growth overshot expectations in Q3. Real GDP rebounded by 1.1% q/q (consensus: 0.9%, RBNZ projection: 0.4%) vs.-1.0% in Q2. The growth pick-up in Q3 was broad-based, with increases in 14 out of 16 industries.”

“The RBNZ signaled at its last November meeting that it’s done easing with a policy rate forecast implying no change until Q4 2026 followed by rate hikes in Q1 2027. The swaps curve is more aggressive and price-in 40bps of rate increases over the next twelve months.”

“Earlier this week, RBNZ Governor Anna Breman pushed back against market expectations for rate hikes next year. Breman stressed that ‘if economic conditions evolve as expected the OCR is likely to remain at its current level of 2.25% for some time’. We agree. There’s still significant spare capacity in the New Zealand economy, with the output gap projected to average -1.1% of potential GDP over 2026 vs. -1.6% in 2025. NZD/USD will likely trade within a 0.5700-0.5860 range in the near-term.”