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FX | Economy | Asia-Pacific

FX Focus - NZDCHF: NZ Rates Higher For Longer, SNB Poised to Cut

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Forecast Spot 0 - 3m 6 - 12m Long-term
NZDCHF 0.5350 0.5550 0.5045 0.5695

*Forecasts as of February 2024.


  • The Reserve Bank of New Zealand (RBNZ) kept rates unchanged in last week’s board meeting at 5.5% where it has been since May 2023 and lowered its cash rate peak forecast to 5.6% from 5.69% previously, indicating less inclination to raise rates further. In its statement, the RBNZ indicated that risks to the outlook for NZ inflation are more balanced than at the time of their November statement. While the risks to the NZ inflation outlook was an unexpected and dovish surprise, the RBNZ signaled that it wants to see the official cash rate remaining where it is for basically this calendar year (ie. no rate cuts this year).
  • NZ market rates now price no further RBNZ rate hikes and discount the first full 25bp rate cut at the RBNZ’s October 2024 meeting followed by another 25bp in November. Though this runs somewhat contrary to RBNZ Governor Orr’s statement that the official cash rate may be unchanged this calendar year, either way, the RBNZ’s higher-for-longer rates outlook means it will likely be one of last major central banks to cut interest rates as most other central banks such as the Fed, ECB, BoE and BoC are expected to commence their rate cut cycle by June. The RBNZ is also likely to cut rates by the least among its peers with rates markets discounting just 50bp in RBNZ cuts this year compared to 85bp for the Federal Reserve, 105bp for the ECB, 65bp for the BoE and 70bp for the BoC. Only the RBA rivals the RBNZ with 50bp of cuts priced for 2024.
  • The Swiss National Bank (SNB) is also expected to cut rates this year and is likely to be the first among its peers as Switzerland faces much weaker inflation outcomes (well below its longer-term target of 2%) than any other advanced economy. This allows the SNB to widen the fight against CHF appreciation by making earlier interest rate cuts to its already much lower rates than the rest of the world. Citi economists now expect a 50bp rate cut from the SNB in March taking its cash rate to 1.25% followed by three more 25bp rate cuts in June, September and December for a terminal rate of 0.5%. Add to this, in recent weeks, SNB rhetoric towards the Franc has shifted to the damage that a strong CHF real exchange rate (adjusted for inflation) is doing to the Swiss economy and the role FX intervention can play in containing this. Recent SNB balance sheet data also suggests the Bank is now a seller of CHF as it pivots away from CHF purchases as its policy tool to combat inflation.
  • The NZDCHF cross offers potentially substantial positive “carry” that results from the difference between RBNZ and SNB cash rates that could potentially widen further in favor of NZD as SNB starts its rate cut cycle much earlier.


NZDCHF – Testing Record Lows 

Source: Bloomberg, February 29, 2024

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