Kiwi slides on a surprise RBNZ hold as the dollar stays firm into Fed day
The New Zealand dollar had the sharpest move of the Asian session on Wednesday after the Reserve Bank of New Zealand left rates on hold when most economists had predicted a rise. The US dollar kept its gains near a two week high, gold gave back part of Tuesday's rally and Brent climbed back above $115 a barrel after a Houthi claim of a strike on Saudi Arabia's biggest refinery.
This report was written on Wednesday morning in London, before the UK Budget statement and the Bank of Canada decision. Prices are from Asian and early European trading, and the times are UK time. We post short updates through the day on our free Forexuro Telegram channel.
Free on Telegram. Get our quick read on the kiwi, gold and the dollar through the Budget, the Bank of Canada and the Fed on the Forexuro channel.
The kiwi slides after a surprise RBNZ hold
The Reserve Bank of New Zealand kept its official cash rate at 2.75%. A Reuters poll had shown 22 of 27 economists looking for an increase, and the New Zealand dollar sank as much as 1.7% to an intraday low of $0.55831. "The market just got that wrong," Mike Houlahan, director at Electus Financial in Auckland, told Reuters, pointing out that the country's election is only 10 days away.
The currency recovered part of the fall after Governor Anna Breman said the rate setting committee expected further increases at coming meetings, adding: "They may even be higher than we said at the September meeting." Thomas Mathews of Capital Economics said the bank had delayed tightening rather than cancelled it, but warned of more dovish surprises and more kiwi weakness over time. Our RBNZ rate decision page shows how NZD/USD usually trades around these announcements.
Across the Tasman the picture was different. Australian consumer prices rose 1.3% in the third quarter, up from 0.6% in the second, and the trimmed mean measure of core inflation rose 1%, keeping its annual rate at 3.6%, above the target. The Australian dollar edged up 0.1% to $0.70345, and Governor Michele Bullock told lawmakers the board will debate next week whether four rate rises this year are enough.
The dollar holds near a two week high
The dollar index, which tracks the US currency against six others, was flat at 102.40 in Asian trading, around its highest level since 14 October, Reuters reported. The euro was flat at $1.1124, the pound slipped 0.1% to about $1.3295 and the dollar was steady at about 157.95 yen. The 10 year Treasury yield rose 2.2 basis points to 5.0112%.
"The Fed doesn't need to hike today to move markets," said Chris Weston, head of research at Pepperstone in Melbourne. "It simply needs to change the perceived probability of hiking in December." That is the question for the dollar tonight: a hold is close to certain, so the reaction will come from the statement, the vote and the press conference rather than the decision itself.
What markets want to hear from the Fed
The Federal Reserve raised rates by a quarter point in September to a range of 3.75% to 4.00% and signalled at least one more increase this year. Fed funds futures priced a 91% chance of no change on Wednesday, according to the CME FedWatch tool, while the chance of a December rise stood at about 84%. Deutsche Bank economists said the statement should change little but that dissents in favour of a hike were possible, which puts the focus on Chair Kevin Warsh at the press conference.
The decision is due at 18:00 UK time and the press conference at 18:30. US clocks do not change until 1 November, so New York is four hours behind London this week. Thursday's September PCE inflation report, the Fed's preferred inflation gauge, comes next. Our FOMC rate decision page explains how each part of the announcement tends to move the dollar and gold.
Gold slips as oil climbs again
Spot gold was down 0.7% at $4,030.20 an ounce by 06:02 UK time, after rising about 1% on Tuesday, and US gold futures for December delivery fell 0.8% to $4,043.00, Reuters reported. Higher oil prices revived the inflation worry that keeps the Fed hawkish. "Gold is moving based on the interest rate expectations and inflation risks because of higher energy prices," said Soni Kumari, an analyst at ANZ. "As a result, the Fed will remain cautious, which remains a short term key headwind for gold."
A Reuters survey showed analysts cutting their 2026 gold price forecasts for a second straight quarter because of high Treasury yields, a strong dollar and the prospect of rates staying higher for longer, although they still look for a recovery in 2027. Spot silver fell 1% to $53.82. Gold has spent the week either side of $4,000, so the Fed tone and Thursday's PCE data matter more for bullion than the rate decision itself. Our XAU/USD signals page shows how we set entries, stops and targets on gold.
Brent back above $115 on the Ras Tanura claim
Brent crude rose $1.59, or 1.4%, to $115.47 a barrel by 04:35 UK time, and US crude gained $1.43 to $101.33, according to Reuters. Yemen's Houthis said on Tuesday they had hit Saudi Arabia's largest refinery, the 550,000 barrel per day Ras Tanura plant, with a missile. Saudi authorities had not confirmed the strike. Prices had fallen nearly $2 on Tuesday as talks in the region eased supply worries.
ING strategists said oil remained elevated as the market waits for clarity on President Trump's next move towards Iran. Industry figures cited by Reuters showed US crude stocks falling by 2.03 million barrels in the week to 23 October, against a Reuters poll that pointed to a small build, and the official EIA report is due later on Wednesday. OPEC+ is likely to keep its December output targets steady at a meeting on Sunday, three sources told Reuters. Oil matters for the Canadian dollar too, which brings us to the next decision of the day.
Bank of Canada: a first hike since 2023 is priced in
The Bank of Canada announces its decision at 13:45 UK time. Its rate has been 2.25% since October 2025, and money market pricing implied a 77% chance of a quarter point rise to 2.50%, Reuters reported. Economists were more divided: 19 of 34 polled by Reuters said the bank would raise rates. A rise would be its first since July 2023, the Globe and Mail noted, as policymakers try to stop energy driven inflation from spreading. Canadian inflation was 3.1% in September.
USD/CAD was 0.1% higher at 1.4063 in Asian trading. It traded near 1.4050 on Tuesday after a five week low of 1.3966 on Friday, according to the Globe and Mail. Scotiabank said a hawkish rise alongside a Fed hold could bring a meaningful gain for the Canadian dollar. Because a hike is mostly priced, the bank's guidance on further moves is likely to drive the loonie more than the decision. Our Bank of Canada rate decision page sets out how USD/CAD usually reacts.
Sterling and gilts into Healey's first Budget
Finance minister John Healey presents his first Budget in parliament just after 12:30 UK time. Reuters reported that banks, gambling firms and online marketplaces are likely to face higher taxes to pay for help with energy bills for poorer households and a fuel duty freeze, and that the budget forecasters are set to say the margin against the tougher fiscal rule has fallen to £15 billion from £24 billion in March. Bond dealers polled by Reuters look for less than £10 billion of extra gilt issuance this financial year.
The gilt market gave a reminder of the pressure on Tuesday, when the Debt Management Office sold £4.5 billion of five year gilts at an average yield of 5.036%, the highest since 2008, with bids worth 3.51 times the amount on offer. Matthew Ryan of Ebury said a market friendly Budget already looked priced, so the bar for a positive surprise for sterling and gilts was high. For how we approach GBP/USD around the statement, see our GBP/USD signals for the Budget week.
The euro waits for Thursday's ECB
The euro was flat at $1.1124 on Wednesday after Tuesday's losses, which left it on track to be the worst performing developed market currency in October, according to Reuters. French debt remains the drag. In Tuesday's European trade the French 10 year yield rose to 4.955% while the German 10 year yield fell to 3.343%, MarketScreener reported, citing Tradeweb.
That leaves France paying more than 160 basis points over Germany and almost as much as the United States for 10 year money. The ECB decides on Thursday. Our EUR/USD signals for the Fed and ECB week explain how we handle a pair with two central bank decisions in two days.
The rest of the central bank week
After the Fed, Thursday brings US third quarter GDP and September PCE inflation alongside the ECB decision, and the Bank of Japan closes the run on Friday 30 October. The Reserve Bank of Australia meets next week.
Our central banks page lists every scheduled decision and the current policy rates in one place.
What the RBNZ surprise shows signal traders
Wednesday's kiwi move is a reminder that a decision the market treats as settled can still go the other way. Reuters reported a fall of as much as 1.7% in NZD/USD, which on a pair near $0.57 is close to 100 pips, well beyond a tight intraday stop. On days with a decision on the pair, size from the stop distance with the position size calculator and decide beforehand whether to hold through the release. The Bank of Canada and the Fed bring the same test for USD/CAD, gold and the dollar later today. If you want to read the charts yourself, The Chart Patterns Playbook explains how breakouts and false breaks behave around news like this, and we share the levels we are watching on the Forexuro Telegram channel.
Official sources
Official pages for the decisions, data and schedules behind this report.
- Federal Reserve: FOMC meeting calendars, scheduled rate decision dates, statements and minutes.
- Bank of Canada: policy interest rate, the current rate and the schedule of announcement dates.
- European Central Bank: monetary policy decisions, the official statements on ECB interest rate decisions.
Frequently asked questions
Why did the New Zealand dollar fall on 28 October 2026?
The Reserve Bank of New Zealand held its cash rate at 2.75% when 22 of 27 economists polled by Reuters had predicted a rise. The kiwi fell as much as 1.7% to $0.55831, then recovered part of the loss after Governor Anna Breman said further increases were likely.
Will the Fed change rates on 28 October 2026?
Markets do not think so. The CME FedWatch tool put the chance of a hold at 3.75% to 4.00% at 91%, with about an 84% chance of a December rise. The decision is due at 18:00 UK time and the press conference at 18:30.
Where was gold before the Fed decision?
Spot gold was down 0.7% at $4,030.20 an ounce by 06:02 UK time on Wednesday, after rising about 1% on Tuesday, as higher oil prices revived inflation worries.
Is the Bank of Canada going to raise rates?
Money market pricing implied a 77% chance of a quarter point rise from 2.25% to 2.50%, and 19 of 34 economists polled by Reuters said the bank would raise rates. The decision is at 13:45 UK time.
What is in the UK Budget for markets?
Reuters reported likely tax rises for banks, gambling firms and online marketplaces, and that the fiscal margin is set to be put at £15 billion, down from £24 billion in March. On Tuesday a five year gilt sale cleared at 5.036%, the highest since 2008.
Sources
- Reuters via Euronext: Dollar steady ahead of Fed decision, kiwi swoons after RBNZ holds
- Reuters via The Hindu BusinessLine: Gold slips on oil fuelled inflation fears ahead of Fed meeting
- Reuters via MarketScreener: Oil rises over 1% after Saudi Arabian refinery attack reignites supply risk
- FXStreet: Gold drops as oil price rebounds, Fed policy eyed
- The Globe and Mail: Canadian dollar extends pullback ahead of pivotal BoC rate decision
- Reuters via Euronext: Healey seeks to steer UK through difficult moment with low key budget
- The Guardian: Britain issues costliest five year debt since 2008 in run up to budget
- FXStreet (Ebury): Investors brace for a smooth sailing fiscal event
- MarketScreener: US Treasury yields edge lower, French bond yields rise ahead of Fed and ECB
- Reuters via Yahoo Finance: Dollar firms ahead of central bank meetings
- Data for the charts: bond yields from Tradeweb as reported by MarketScreener; decision times from Reuters and the Federal Reserve, Bank of Canada and ECB calendars.
Keep reading
GBP/USD signals for the Budget week · FOMC rate decision · Central bank calendar · Weekly forecasts