Premium Watchlist Recap: RBNZ Monetary Policy Decision (October 2025)

The Reserve Bank of New Zealand (RBNZ) surprised markets with a larger-than-expected 50bps rate cut, bringing the cash rate down to a three-year low of 2.50% after weaker-than-expected Q2 GDP.

How did the New Zealand dollar react, and which among our watchlist pairs yielded the best trading opportunity?

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We’re breaking down our NZD setups this week and how each pair performed after the bearish RBNZ decision and the back-and-forth in risk sentiment.

The Setup

What We Were Watching: RBNZ Monetary Policy Decision for October 2025

• The Expectation: Markets anticipated the central bank would cut its Official Cash Rate by 25bps to 2.75%
• Data outcome: RBNZ surprised the markets with a 50-bps rate cut, citing weaker-than-expected Q2 GDP. However, the central bank signaled that lower interest rates are beginning to support household consumption, and that underlying domestic inflation may continue to decline.
• Market environment surrounding the event: Neutral to positive risk sentiment midweek, as U.S. shutdown concerns and political jitters in France and Japan were temporarily overshadowed by FOMC’s meeting minutes supporting further rate cuts within a divided committee.

Event Outcome

The RBNZ surprised markets by cutting its Official Cash Rate by 50 basis points to 2.50% instead of the expected 25bp reduction, bringing rates to their lowest level in three years.

The central bank justified the larger cut by pointing to weaker-than-expected Q2 GDP data and continued weakness in household consumption, though policymakers noted that lower rates are beginning to support economic recovery.

The committee remains confident that underlying inflation pressures are moderating and projected inflation will return to the 2% target by the first half of 2026.

Key Takeaways:

• OCR cut by 50bp to 2.5%, exceeding market expectations of 25bp
• Inflation projected to return to 2% target by the first half of 2026
• Weak Q2 GDP contracted 1.1% year-on-year, worse than the 0.9% decline forecast
• Committee remains open to further cuts if inflation pressures continue to ease
• Domestic inflationary pressures are moderating, giving policymakers confidence to act decisively
• Trading partner growth is improving for 2025, particularly China, Taiwan, and other Asian economies, though expected to slow in 2026

Fundamental Bias Triggered: Bearish NZD setups

Broad Market and Exogenous Drivers:

Monday–Tuesday: Records Fall as Shutdown Meets Political Shifts

The week began with rallies despite ongoing government shutdown jitters. Political upheavals in Japan and France, combined with U.S. fiscal uncertainties, created a perfect storm for haven assets.

Gold came closer to the $4,000 mark. Bitcoin joined the debasement party, rocketing to $126,300 before settling near $122,000. The S&P 500 notched fresh records above 6,740, shrugging off shutdown concerns as AMD’s OpenAI partnership fueled tech optimism. WTI crude found relief above $62 after OPEC+’s modest 137,000-barrel production hike calmed fears following last week’s 7.4% rout. Tuesday’s late-session profit-taking hinted at buyer exhaustion, with tech giants dragging the Nasdaq lower amid Oracle cloud margin concerns.

Midweek: Fed Minutes Fuel Risk Rally

Wednesday saw risk appetite persist as markets prioritized potential Fed rate cuts over shutdown theater.

The S&P 500 climbed to another record above 6,750, with gains accelerating post-FOMC minutes release. Gold’s relentless march continued with a 1.47% surge past $4,035, prompting Goldman Sachs to raise its 2026 forecast to $4,900/oz on ETF and central bank demand expectations. The 10-year Treasury yield held steady at 4.16% despite data gaps, while bitcoin maintained its correlation with gold, rising 1.33% above $123,600.

Thursday–Friday: Geopolitical Shifts and Trade War 2.0

Markets wobbled Thursday as a Gaza ceasefire eased Middle East tensions, triggering haven profit-taking. Gold retreated from its $4,000+ perch to $3,977, while crude plunged over 1% to $61.50/barrel on reduced geopolitical risk premium.

Friday delivered the week’s knockout punch as Trump threatened “massive” tariff increases on China following Beijing’s rare earth export controls and Qualcomm antitrust probe. The S&P 500 tumbled 1.5% for its worst day since April, with tech titans bearing the brunt – Nvidia down 2%, AMD off 5%, and Tesla sliding 3%. Oracle’s revelation of 14% AI cloud margins versus 70% traditional software margins intensified bubble fears. As the shutdown entered day 10 with no resolution in sight, bitcoin retreated to $113,000, completing the risk-off pivot that defined the week’s close.

EUR/NZD: Neutral-to-bearish Event Outcome + Risk-On Scenario

= Arguably good odds of a net positive outcome

Our watchlist setup eyed a Fib support bounce if the RBNZ maintains or steps up its dovish bias, as EUR/NZD was hovering above an ascending trend line and area of interest around the 2.0100 major psychological mark.

The surprise 0.50% rate cut triggered a sharp pop higher for the pair as expected, lifting it up to R1 (2.0254) before the initial event reaction faded, and resurfacing trade-related uncertainty from fresh U.S. threats against the EU forced the shared currency to retreat.

Still, EUR/NZD managed to keep its head above the target entry zone around the 38.2% Fib and S1 (2.0047), with the Kiwi selloff regaining traction towards the end of the week thanks to Trump’s tariffs bombshell on China. The pair blew past its post-RBNZ highs to test the next ceiling around the 2.0300  major psychological level before the close.

Not Eligible to move beyond Watchlist – Bullish NZD Setups and Bearish NZD/CHF Setup

NZD/CHF: Neutral-to-bearish Event Outcome + Risk-Off Environment

NZD/CHF 1-hour Forex Chart by TradingView

This watchlist setup also focused on a potential Fib bearish reversal in case a dovish RBNZ decision sparks a Kiwi selloff in a risk-off scenario. Post RBNZ event release, a risk-off environment didn’t seem to be the likely environment ahead given the arguably bullish broad market lean despite U.S. government shutdown fears, so this setup took a step back to the EUR/NZD setup above and was invalidated.

While the target event did spur a sharp drop after the surprise 0.50% rate cut, the pair’s decline was cut short around S1 (.4600) which coincided with a major psychological level, followed by a rally to pre-RBNZ levels as sentiment for the European region soured on political instability and resurging trade uncertainty.

From there, NZD/CHF consolidated above the pivot point level for some time before the risk-on rug was pulled from under the Kiwi’s feet on Friday’s U.S. tariffs drama against China (which also prompted big flows into CHF), taking price to fresh intraweek lows at S2 (.4567).

NZD/JPY: Bullish NZD Event Outcome + Risk-On Environment

NZD/JPY 1-hour Forex Chart by TradingView

NZD/JPY’s bullish momentum looked intact after bouncing from 85.50 and holding above 87.50, with 88.00 shaping up as the possible breakout level. The bullish NZD scenario was invalidated by the target event outcome, as the RBNZ’s bigger-than-expected rate cut caused sharp NZD downswings.

While the yen’s relative weakness eventually pushed NZD/JPY to the 88.50 area, RBNZ’s dovish event limited NZD’s gains and the pair eventually drew bearish pressure when the U.S.-China trade tensions heated up near the end of the week. NZD/JPY spent Thursday and Friday below the marked inflection points and closed lower than the watchlist levels.

NZD/CAD: Bullish NZD Event Outcome + Risk-Off Scenario

NZD/CAD 1-hour Forex Chart by TradingView

NZD/CAD had been grinding higher since late September, but momentum cooled after a rejection near .8150. The watchlist looked into buying at a pullback in case RBNZ’s event turned out bullish for Kiwi.

The bullish NZD case was invalidated with RBNZ’s sharper-than-expected interest rate cut. On top of that, the Loonie was already gaining ground ahead of the event, likely riding the boost from stronger oil prices as WTI climbed toward $63 amid rising geopolitical tensions. NZD/CAD slid back to its September lows after the dovish move and wrapped up the week near fresh October lows, with arguably a bit of help from better-than-expected Canadian employment updates.

The Verdict

The RBNZ October decision turned out more dovish than expected, triggering a bearish NZD bias as the central bank implemented a more aggressive easing move and indicated scope for more. However, political developments and trade-related headlines added a layer of complexity for the European region and overall market sentiment, before commodity currencies ultimately took a major hit from Trump’s announcements.

EUR/NZD proved to be the most viable setup for the week given the target event outcome, and the relatively net positive broad market environment on Wednesday.  Also, from a technical standpoint the pair bounced off the target entry area during the event and stayed above this level throughout. Price advanced from the 2.0050 support zone to the first bullish target around the 2.0250 mark before pulling back midweek, then eventually drew more buyers to sustain a bigger bounce on Friday.

Overall, we rate the EUR/NZD setup as “highly likely” supportive of a net positive outcome since the pair picked up on the anticipated bearish NZD bias and remained in a solid position to take advantage of further Kiwi weakness, on tariff threats. Although the euro faced headwinds from French political chaos and trade uncertainty, reassurances from top government officials and neutral-to-upbeat ECB commentary kept the shared currency on good footing despite risk sentiment swings.

Traders who were quick to hop in on the action during the actual event and book profits before the midweek turnaround could have bagged roughly 150-200 pips while those who kept the short NZD (long EUR/NZD) position open until Friday would have likely caught an additional 50 pips on the larger move.  There was even a chance for those who missed the initial move to jump back in at the target area of interest and ride a solid 100 – 200 pips higher to swing highs. 

Key Takeaways:

Always keep tabs on tariffs drama

While trade-related headlines appear to have taken the back seat in the past weeks as geopolitical tensions, the U.S. government shutdown, and central bank policy changes took center stage, never underestimate the far-reaching impact of Trump’s tariffs tantrums particularly on overall market sentiment and safe-haven flows.

Mind counter currency flows and catalysts

NZD/CAD fell before the RBNZ event on rising oil prices and CAD strength, while NZD/JPY briefly broke above its resistance area on relative JPY weakness (despite the RBNZ event turning out dovish for NZD). Counter currencies can have their own drivers that either support or work against your directional bias.

Don’t underestimate end-of-week headlines and flows

Mind potential catalysts as long as your trades are open. Consider trade and risk management after the target event, as exogenous factors can quickly shift market dynamics—just as Friday’s tariff threats triggered fresh NZD weakness well after the RBNZ decision had passed. Locking in profits is a good trade strategy to consider the closer you get to profit targets and/or the weekend.