UBS: New Zealand Federal Reserve to cut interest rates by 25 basis points in August, the New Zealand dollar may not perform well in the next year

Markets have raised expectations for a 25 basis point rate cut by the Reserve Bank of New Zealand in August, putting the probability of a rate cut at around 70%. UBS now expects the Reserve Bank of New Zealand to cut interest rates by 25 basis points for the first time in August, and believes the NZ dollar could underperform most G10 currencies over the next 12 months.At 10:00 on August 14, Beijing time, the Reserve Bank of New Zealand will hold an interest rate decision. Market analyst Gary Howes wrote that if the possibility of the Reserve Bank of New Zealand cutting interest rates in August continues to rise,New Zealand dollarIt may continue to be under pressure.

UBS: New Zealand Federal Reserve is expected to cut interest rates by 25 basis points in August, and the New Zealand dollar may not perform well in the next year (Figure 1)

(One-hour chart of the New Zealand dollar against the US dollar)

foreign exchange trading platform"The New Zealand dollar is still falling and is the worst performing of the G10 currencies," said Kim Mundy, an analyst at RBNZ. "Expectations of a recent rate cut by the Reserve Bank of New Zealand continue to weigh on the New Zealand dollar."

The New Zealand economy is under pressure from rising interest rates, while Asian demand for New Zealand exports continues to disappoint.

"We stand by our non-consensus view that the RBNZ will start cutting rates at its next meeting in August," said Abhijit Surya, Australia and New Zealand economist at Capital Economics.

UBS updated its forecast for the New Zealand dollar, which is expected to underperform against G10 currencies including the dollar.

UBS now expects the Reserve Bank of New Zealand to cut interest rates by 25 basis points for the first time in August, up from its initial forecast in November. The rate is expected to fall to 3.25% by the fourth quarter of 2025 from the current 5.5%.

For investment reasons, UBS insists that the NZ dollar is likely to underperform most G10 currencies over the next 12 months. They also expect the Australian dollar to rise to around 1.15 against the NZ dollar over the same period and recommend increasing positions above the current level of 1.10.

The technical indicators of the New Zealand dollar are showing signs of weakness, with the Relative Strength Index (RSI) falling and the spot exchange rate falling sharply below the 50-day moving average, while momentum remains neutral.

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