Outlook
The New Zealand dollar has been supported by improved risk appetite, but gains may stall as domestic data showed December private sector activity continuing to shrink. The kiwi faces a tricky backdrop from policy hints and global trade dynamics: the RBNZ began easing in 2025 and markets expect further cuts, which can weigh on the currency over time, while the Federal Reserve remains more cautious on rate cuts, potentially widening the policy gap. An upcoming New Zealand general election adds political uncertainty, though near-term moves are likely to hinge on dataflow and global risk sentiment. In this environment, modest kiwi strength could persist on positive market mood but sustained upside is uncertain without a clearer domestic growth path.
Key drivers
- Risk sentiment and global growth expectations supporting risk-sensitive currencies.
- RBNZ policy path: a 50 basis point cut to 2.75% in October 2025 with expectations of further easing; this dovish tilt tends to pressure NZD longer term.
- US trade tensions: tariffs on NZ exports could dent export revenue and feed into inflation dynamics, adding to NZD headwinds.
- Federal Reserve policy stance: markets see the Fed delaying rate cuts, contrasting with the RBNZ easing cycle, influencing NZD/USD dynamics.
- Domestic data: December private sector contraction suggests domestic momentum remains weak, limiting upside unless activity improves.
- Political risk: a general election in 2026 could introduce policy shifts, adding uncertainty to NZD outlook.
Range
NZD/USD is at 0.5824, which is 1.5% above its 3-month average of 0.5738, having traded within a stable 4.5% range from 0.5590 to 0.5839. NZD/EUR is at 0.4967, just 0.8% above its 3-month average of 0.4928, with a stable 2.6% range from 0.4850 to 0.4977. NZD/GBP is at 0.4334, 0.5% above its 3-month average of 0.4311, range 0.4268 to 0.4368. NZD/JPY is at 92.12, 3.0% above its 3-month average of 89.41, with a broader 7.0% range from 86.24 to 92.27.
What could change it
- Surprise shifts in RBNZ policy (earlier or deeper easing or a hawkish shift) or comments that alter rate-path expectations.
- Data surprises for NZ economic activity (stronger-than-expected private/public sector data or signs of rebound).
- Changes in US tariff policy or broader trade developments affecting NZ export revenue and inflation.
- A clear shift in Fed signaling toward sooner or larger rate cuts or, conversely, a more hawkish stance.
- Developments around the 2026 New Zealand general election that lead to policy surprises.
