RBNZ neutral tilt sparks NZD breakout, easing cycle seen over

• RBNZ cuts OCR by 25bp to 2.25%, vote split 5-1
• Neutral guidance signals no further easing for now
• Rate track shows 2.25% likely the low before hikes from 2027
• Kiwi rallies sharply as markets slash easing expectations

Summary

The Reserve Bank of New Zealand (RBNZ) has effectively called time on its easing cycle after 325 basis points of cuts, including another 25 today, providing neutral guidance in its policy statement and updated rate track path that signals it believes the cash rate has bottomed. The Kiwi dollar is flying on the news, both against the U.S. and Australian dollars.

One More and Done

As expected, the RBNZ cut the cash rate by 25 basis points to 2.25% in November. The vote was 5-1 in favour of the decision, with deliberation centred on whether to hold or cut the cash rate by 25 basis points, not whether to ease by 25 or 50. The split decision implies one member voted to keep the cash rate steady, an outcome that would have provided a major shock if delivered given markets were pricing 27 basis points of cuts for the meeting.

While five members voted for another reduction in the cash rate, the updated statement and forecasts suggest the broader committee believes the nadir has been hit for the easing cycle.

“Future moves in the [overnight cash rate] OCR will depend on how the outlook for medium-term inflation and the economy evolves,” the RBNZ said, delivering clear neutral guidance to markets that further easing is not being considered at this time.

Source: RBNZ

The updated rate track path—in which the RBNZ communicates where it sees the cash rate in the future—retained a small risk of a further reduction, although the far higher implied probability is for 2.25% to be the low before the risk of hikes begins from early 2027. Prior to today’s rate decision, a total of 41 basis points of easing was being priced into the overnight index swaps curve into next year. Now, less than four are being priced, with the first hike of the cycle now deemed highly probable by September 2026.

While only half a cut has been effectively removed from the curve, it’s the signal from the RBNZ that it thinks it’s done which has powered huge gains in the Kiwi, including against the USD and AUD. For those who have not seen examples of this before, when central banks call time on easing or tightening cycles it can have a dramatic impact on their respective currency’s performance, and we may well be seeing a repeat performance on this occasion. It feels like an important moment for the New Zealand dollar.

A Kiwi Cruise Missile

As forewarned in our primer released before the RBNZ decision, the Kiwi was signalling it may have already seen the lows. Today’s decision bolsters that view, helping spark multiple bullish breakouts in response.

Source: TradingView

NZD/USD is now trading through the uptrend it has been in for the entirety of the second half of the year, breaking higher out of the falling wedge it had been trading in. Convention suggests that a bullish breakout from such a pattern could see the pair return to where it started, implying .6000 may be on the cards. Perhaps a tad ambitious right now, but it does put higher levels such as .5692, 50DMA, .5775 and .5800 in play if the breakout sticks. On the downside, .5639 may now flip to providing support with .5582 the next level of note.

The momentum picture is quickly shifting with RSI (14) now above 50 while MACD has crossed the signal line from below and is trending higher, indicating directional risks are skewing neutral from what’s been a prolonged period of bearish dominance.

Source: TradingView

The uptrend in AUD/NZD has also buckled in response to the RBNZ’s neutral tilt, proving no match for bears despite what was an ugly Australian inflation report for October that may soon have the RBA calling time on its easing cycle. With the clean break of the uptrend, the 50DMA is the next downside level to watch. If it were to be traded through sustainably, 1.1350 and 1.1280 support will be eyed by bears as targets. Above, 1.1527 proved tough to crack even before the RBNZ turned neutral, suggesting any rallies towards 1.1500 may be sold into.

Like with NZD/USD, the momentum picture is quickly shifting for the pair. RSI (14) is now trending lower beneath 50, indicating building downside pressure. MACD has yet to confirm, although it’s already crossed the signal line from above and is motoring towards negative territory. Therefore, the overall bias is now tilting bearish.