NZD/USD stayed in a tight range near 0.6040 in the European session on Monday, ahead of the Reserve Bank of New Zealand (RBNZ) policy decision on Wednesday. Markets expect the RBNZ to keep the Official Cash Rate at 2.25% and to keep a hawkish stance.
New Zealand inflation has increased over the past four quarters. The Consumer Price Index rose 3.1% year-on-year in Q4 2025. Markets will also watch the Q4 Wage Price Index on Wednesday, with wage growth expected at 0.8%.
Market Focus On RBNZ Decision
The US Dollar was steady during the long US weekend for President’s Day. The US Dollar Index hovered near 97.00.
US inflation cooled in January. Headline inflation slowed to 2.4% year-on-year, down from 2.7% in December. The RBNZ targets CPI inflation between 1% and 3% while supporting maximum sustainable employment.
The RBNZ sets the OCR through its Monetary Policy Committee. It uses rate changes to influence borrowing and inflation. In extreme cases, it can use quantitative easing, which usually weakens the New Zealand Dollar.
With NZD/USD still near 0.6040, traders are waiting for Wednesday’s RBNZ decision. A long period of calm trading often comes before a larger move. The main thing to watch is the RBNZ’s language on future rate increases.
Options Strategy For A Breakout
We expect the RBNZ to stay hawkish because inflation remained high in late 2025 at 3.1%. Stats NZ data also shows January 2026 food prices rose 0.9% for the month. This suggests price pressures are not fading quickly. As a result, a firm message from the central bank seems likely.
With that in mind, buying short-dated NZD/USD call options may be a sensible approach. This gives traders exposure to a possible jump after the meeting, while limiting losses if the RBNZ surprises with a dovish shift. Consider strike prices just above the current range, such as around 0.6100.
On the US side, the Dollar is losing momentum as inflation shows signs of easing. With January inflation at 2.4%, the CME FedWatch Tool now shows less than a 20% chance of a Federal Reserve rate hike in March. That is a sharp drop from early in the year. This gap in policy outlook—a hawkish RBNZ versus a more patient Fed—supports NZD/USD on the upside.
A similar pattern appeared in late 2021. The RBNZ started raising rates earlier than many other central banks, and the Kiwi rallied for an extended period. This week’s wage price index will also matter. Strong wage growth would reinforce the inflation story and could push NZD/USD higher. For these reasons, a break above recent highs looks more likely than a drop below support.
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