FX.co ★ Kiwi Dollar Set for Sharp Weekly Rise

The New Zealand dollar experienced a slight decline, reaching approximately $0.592, yet it remains poised for its most robust weekly performance since April 2025. This uptick follows a consumer price index (CPI) report that exceeded expectations. Annual inflation rose to 3.1% in the fourth quarter, surpassing the projected 3%, breaching the Reserve Bank's target range, and marking the highest level since the second quarter of 2024. Although policymakers anticipate inflation gradually tapering to 2% within the year, the unexpectedly strong data suggest that any easing measures may now be concluded, increasing the likelihood of higher interest rates. In the short term, market expectations remain largely steady, with little anticipation of a policy adjustment in February. This outlook persists after Governor Anna Breman's December remarks, which countered speculation of an immediate interest rate hike. Investors are now pricing in a significant probability of a rate increase by September, with an estimated 50% chance of action in July. Meanwhile, ongoing weaknesses in the US dollar continue to lend additional support to the New Zealand dollar.