NZD/USD price slides below 0.5650 as weak GDP fuels rate cut speculation
NZD/USD declines due to weak New Zealand GDP
The NZD/USD pair fell to 0.5625 during the Asian trading session on Friday, driven by weaker-than-expected New Zealand Q3 GDP data. The economy contracted, intensifying fears of a deepening recession and prompting market speculation of more aggressive interest rate cuts from the Reserve Bank of New Zealand (RBNZ).
Analysts now expect a 91% probability of a 50-basis-point rate cut in February 2025. New Zealand’s disappointing GDP results heightened concerns about the country’s economic outlook. Hamish Pepper, fixed income and currency strategist at Harbour Asset Management, noted that the RBNZ might accelerate interest rate cuts to return the official cash rate to a neutral level sooner than anticipated in its November policy statement.
NZD/USD chart (Nov 2024 - Dec 2024) Source: Trading View
The GDP contraction has strengthened the bearish sentiment around the Kiwi, weighing on the NZD/USD. The pair is now targeting the next support levels at 0.5600 and 0.5560. A decisive break below these thresholds could push the currency pair further toward 0.5500.US Dollar Strength Adds to Downside Risks
Simultaneously, the US dollar gained momentum after the Federal Reserve maintained a cautious outlook on interest rate cuts. Fed Chair Jerome Powell reaffirmed the central bank's commitment to controlling inflation despite a recent 25-basis-point rate reduction. This hawkish stance has bolstered the greenback, adding downside pressure on the NZD/USD pair.
Looking ahead, traders will closely monitor the US Core Personal Consumption Expenditures (PCE) Price Index, expected to increase by 2.9% YoY in November. A higher-than-expected reading could further strengthen the US dollar and press the Kiwi lower.
We analyzed how NZD/USD faced intense selling pressure after weak New Zealand GDP figures and the Fed's hawkish policy outlook, signaling prolonged bearish momentum.
