The New Zealand Dollar initially weakened before staging a recovery against the USD today, as the Reserve Bank of New Zealand (RBNZ) delivered its third consecutive 50 basis point cut while signaling a more measured pace ahead for future reductions. The NZDUSD pair is currently trading at 0.5720, with investors parsing through the central bank's forward guidance amid rapidly evolving global dynamics.
Transition to Measured Rate Cuts
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appThe RBNZ's latest policy action saw its Official Cash Rate (OCR) lowered to 3.75% from 4.25%, maintaining its position as one of the most aggressive rate-cutters among major central banks. Governor Adrian Orr has signaled a transition to smaller 25-point cuts in April and May, suggesting a more calibrated approach as the bank seeks to balance economic recovery with inflation management. This shift in strategy comes as the central bank expresses growing confidence in its ability to manage price pressures while supporting growth.
CPI vs Rates. Source: Bloomberg L.P.
Inflation Dynamics and Price Pressures
The inflation outlook presents a complex picture, with the RBNZ's updated forecasts showing a potential re-acceleration to 2.7% later this year. This projection is being influenced by several factors, including the impact of exchange rate movements, rising fuel prices, and uncertainty surrounding the effects of US trade policy. The central bank has noted that near-term price pressures may remain volatile as these various influences play out.
Global Context and Trade Uncertainties
The global context remains particularly challenging, with markets digesting Donald Trump's re-election and renewed tariff threats, which have heightened concerns about international trade flows. Economic growth expectations globally remain subdued, while increasing geoeconomic fragmentation adds another layer of complexity to the outlook. The policy landscape among major central banks continues to diverge, with the Reserve Bank of Australia only just beginning its easing cycle, in contrast to the RBNZ's more advanced path.
Forward Outlook and Economic Recovery
Looking ahead, the RBNZ has projected the OCR to fall to approximately 3% by year-end, a more aggressive reduction than previously indicated. While an economic recovery is anticipated in 2025, currency movements will be influenced by several key factors, including forthcoming domestic GDP data, developments in global trade policy, business investment decisions, and export sector performance. The labor market is expected to show signs of improvement in the second half of 2025, which could provide additional support for the currency.
NZDUSD (D1 Interval)
The NZDUSD pair is trading at its January high of 0.57224. For upside momentum to continue, the 100-day SMA should be retested. If successful, the 0.5831–0.5912 range could come into play. On the other hand, the 50-day SMA at 0.56427 currently acts as support. The RSI is showing bullish divergence with higher highs, while the MACD continues to widen.
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
