Barclays projects that the New Zealand dollar will move higher over the coming months, supported by guidance from the Reserve Bank of New Zealand (RBNZ) that envisages 75 basis points of additional interest rate increases by the end of 2026.
The bank highlights that the RBNZ's planned tightening creates scope for the currency to rise, noting that policy rates in New Zealand start from a relatively lower level. Barclays points to recent growth data as further backing for its outlook: activity surprised on the upside in the fourth quarter of 2025 and again in the first quarter of 2026.
Despite this more positive near-term signal, Barclays stresses that the improvement in growth must persist. The bank emphasises that New Zealand's economy is starting from a deeply negative output gap, meaning the recovery requires continued momentum rather than a brief uptick.
Barclays also contrasts New Zealand's position with that of Australia. The bank notes that, unlike Australia, New Zealand has not received a boost from an improvement in its terms of trade, which limits some of the structural support for the currency.
On cross-rate performance, Barclays expects the New Zealand dollar to continue to underperform against the Australian dollar despite the RBNZ's guidance and recent growth surprises.
Market participants should weigh the RBNZ's guidance and the recent growth outperformance against the structural constraint of a large output gap. The interplay between policy expectations and economic momentum will likely influence currency moves, but Barclays' forecast also recognises regional divergence with Australia on terms of trade.
In summary, Barclays' view is built on three observable points reported by the RBNZ and in official growth data: planned policy tightening of 75 basis points by end-2026, a lower initial policy rate that provides room for appreciation, and growth outcomes that have exceeded expectations in Q4 2025 and Q1 2026. Those factors support a stronger New Zealand dollar in the bank's outlook, while persistent output gap concerns and the absence of a terms of trade benefit relative to Australia temper that view and leave the NZD forecast to lag the AUD.