BNY’s EMEA Macro Strategist Geoff Yu expects the Reserve Bank of New Zealand to keep the policy rate at 2.25% on 18 February. However, he notes that markets are increasingly pricing in tighter policy, as inflation remains stubborn. BNY says that confirmation of a policy shift could support higher NZD valuations. It adds that the currency is relatively underheld, which may affect positioning in NZD crosses.

Rbnz Policy Shift And Nzd Outlook

The bank also says the RBNZ can use strength in currency crosses to help limit rises in tradables inflation. It expects the NZD’s path to remain volatile, given New Zealand’s policy cycle. The article says it was produced using an artificial intelligence tool and reviewed by an editor. It also says the FXStreet Insights Team selects market observations from external experts and adds internal and external analysis. With the Reserve Bank of New Zealand meeting this Wednesday, the cash rate is expected to stay at 2.25%. The main focus is the bank’s tone, because markets are starting to expect rate hikes. Persistent inflation is pushing the RBNZ to consider tightening policy sooner. Inflation in the final quarter of 2025 came in at 4.5%, well above the bank’s 1–3% target range. The labour market is also tight, with unemployment falling to 3.8% in the same period. This increases pressure on the RBNZ to signal a tougher stance. A hawkish message on Wednesday looks likely, even if the rate does not change.

Trading And Positioning Implications

For derivatives traders, this suggests positioning for a stronger New Zealand dollar over the next few weeks. With policy uncertainty still high, buying NZD call options is a straightforward way to target a potential rise while limiting risk. Clear confirmation of a shift from the RBNZ could give the currency a meaningful lift. The NZD also appears to be underowned, which suggests investors have room to add long positions. That makes cross trades—such as buying NZD against the Australian dollar—more attractive. The RBNZ can also use a stronger exchange rate to reduce inflation coming from imported goods. The RBNZ paused its hiking cycle through most of 2025, expecting global disinflation to ease domestic price pressures. That approach now looks less effective. A clear change in wording this week would confirm a more assertive policy direction. That is the shift traders may want to position for. Create your live VT Markets account and start trading now.

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