NZD/USD trades with mild gains above 0.5900 after New Zealand’s CPI data

NZD/USD posts modest gains to around 0.5935 in Thursday’s early Asian session.
New Zealand CPI inflation rose to 2.5% YoY in Q1 as import costs rose.
Traders keep betting on Fed rate reductions this year, starting in June.

Lallalit Srijandorn FXStreet

The NZD/USD pair extends the rally to near 0.5935 during the early Asian trading hours on Thursday. The New Zealand Dollar (NZD) edges slightly higher against the US Dollar (USD) after the hotter inflation data. The US Building Permits, Housing Starts, the Philly Fed Manufacturing Index, and the weekly Initial Jobless Claims will be published later on Thursday.

Data released by Statistics New Zealand on Thursday showed that the country’s Consumer Price Index (CPI) rose 2.5% YoY in the first quarter (Q1) of 2025, compared with the 2.2% increase recorded in the fourth quarter of 2024. This reading came in hotter than the expectation of 2.3%. Meanwhile, the quarterly CPI inflation climbed to 0.9% in Q1 from the previous reading of 0.5% and above the market consensus of 0.7%.

The inflation figures were somewhat higher than the Reserve Bank's (RBNZ) February forecasts, but analysts believe that the increase will not prevent additional reductions to the Official Cash Rate (OCR) in the coming months.

On the USD’s front, consumer spending was stronger than expected in March, the US Census Bureau revealed on Wednesday. US Retail Sales rose by 1.4% in March, followed by the 0.2% increase seen in February. This figure came in better than the estimation of 1.3%. Markets reacted little to the release.

Traders keep bets on Federal Reserve (Fed) rate cuts this year after Fed Chair Jerome Powell said that the central bank is well-positioned to wait for greater clarity before making any changes to the stance of policy. Financial markets expect the Fed to resume rate cuts in June and that by year-end the policy rate, currently in the 4.25%-4.50% range, will be a full percentage point lower.

New Zealand Dollar FAQs

What key factors drive the New Zealand Dollar?

The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.

How do decisions of the RBNZ impact the New Zealand Dollar?

The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.

How does economic data influence the value of the New Zealand Dollar?

Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.

How does broader risk sentiment impact the New Zealand Dollar?

The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

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Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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