NZD: Expect two RBNZ cuts by year-end – ING

New Zealand’s 2Q jobs data released overnight showed some slack is building, although not at an alarming pace, ING's FX analyst Francesco Pesole notes.

Upside room for NZD/USD into year-end

"Unemployment rose from 5.1% to 5.2%, less than the consensus 5.3%, with employment declining 0.1% quarter-on-quarter, in line with expectations. Wages accelerated slightly more than expected, though."

"For now, benign CPI figures for 2Q justify a cut on 20 August, and we remain of the view that further inflation moderation and growth uncertainty could lead to another 25bp reduction in November. Markets are fully pricing in an August move, and 42bp in total by year-end."

"In line with our call that the Reserve Bank of New Zealand won’t materially outpace the rate-cutting trajectory embedded into swaps, we continue to see upside room for NZD/USD into year-end on the back of our bearish USD call, with a return above 0.60 being our base case."