New Zealand Stellar GDP Sees Odds of a Rate Hike Jump

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New Zealand’s better-than-expected economic growth data has seen traders ratchet up odds of an interest-rate hike next month, and also propelled the kiwi toward a key resistance level.

The probability of a 50-basis-point hike by the Reserve Bank of New Zealand at its October meeting rose to 44% after the numbers were published, from just 16% on Wednesday, according to overnight-index swaps. Gross domestic product accelerated to 2.8% in the second quarter, government data showed, versus the median estimate of economists of 1.1%.

Swaps traders also increased expectations for hikes by November. A move of 50 basis points is fully priced in by then with a further 60% probability of an additional 25 basis points, compared with less than 20% odds on Wednesday. The central bank has kept its official cash rate at a record low 0.25% since March 2020.

New Zealand’s dollar also rallied after the figures were published, climbing as much as 0.5% to 71.38 U.S. cents. A close above its September high of 71.70 cents is needed as proof that the technical resistance that’s been in place since February has given way, which should open the door for further gains.

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