Third straight RBNZ hike priced in by New Zealand Dollar traders

• 0.5700 remains out of reach at the close as NZD/USD stalls just above it for a fourth session.
• 3.50% is TD Securities' new RBNZ rate forecast after three hikes, but the Kiwi retreats.
• 3.00% is the expected RBNZ rate after Wednesday's hike, ahead of the election.

0.5700 remained above NZD/USD's closing level on Monday. For a fourth consecutive session, the pair stalled just above that threshold as traders bought US Dollars ahead of Wednesday's Fed decision. The decline came despite TD Securities abandoning its forecast for a Reserve Bank of New Zealand (RBNZ) pause in favour of three rate increases.

A quarter-point RBNZ increase to 3.00% carries a market-implied probability of nearly 90%. In a Reuters survey, 22 of 27 economists also forecast that outcome. With the increase already priced in, the Kiwi's prospects depend on the subsequent policy path. A further rise to 3.25% in December is expected by nine of 23 economists in the same poll.

At 3.7%, third-quarter inflation came in below the RBNZ's 3.9% projection. Economists nevertheless expect a rate increase: they see fuel costs and a softer Kiwi pushing inflation back above 4% in the fourth quarter. The currency's weakness therefore forms part of the argument for tighter policy.

3.00% in focus for Wednesday's RBNZ decision

At 01:00 GMT on Wednesday, the RBNZ will release its rate decision and Monetary Policy Review. The cash rate is forecast to increase from 2.75% to 3.00%. The announcement falls ten days before New Zealand's 7 November election. The central bank's own rate projections span the December and February meetings underpinning TD's forecast.

A 3.75%-4.00% range is expected to remain in place when the Fed announces its decision on Wednesday. Its statement is scheduled for 18:00 GMT, followed by Fed Chair Warsh's press conference. US rates would remain above the 3.00% expected for the RBNZ. Before then, Tuesday's September durable goods orders are forecast to show a 0.6% increase.

50-day EMA caps NZD/USD recovery

Below the 50-day Exponential Moving Average (EMA), NZD/USD's recovery from its 14 October low just above 0.5550 has lost momentum. The 200-day EMA sits just below 0.5800. About a fifth of the recovery was erased by Monday's decline, while daily momentum is overbought for the first time since late July.

NZD/USD: daily price chart