NZD Leads G10 Gains in Early July, but ANZ Remains Cautious About Outlook

(1) The New Zealand dollar became the strongest-performing G10 currency in early July. (2) The market expects the Reserve Bank of New Zealand to accumulate further interest rate hikes totaling 80 basis points by next March, raising the official overnight cash rate to 3.3%, above the 3.0% seen earlier this year, providing support for the New Zealand dollar. (3) However, ANZ Head of FX Research Mahjabeen Zaman remains unconvinced about a sustained rally, adopting a cautious approach mainly due to concerns that renewed US-Middle East tensions may suppress global risk appetite and thus drag down the New Zealand dollar’s performance.