NZD/USD edges lower to near 0.5800 due to weakening consumer confidence
- NZD/USD loses ground as Westpac Consumer Survey indicates weakening consumer confidence in New Zealand.
- Westpac New Zealand reported a decline in its confidence index, falling to 89.2 in Q1 from 97.5 in the prior quarter.
- The US Dollar remains firm as traders adopt caution ahead of the Fed interest rate decision due on Wednesday.
NZD/USD remains subdued for the second consecutive day, hovering around 0.5810 during Wednesday’s Asian session. The pair faces downward pressure following the release of New Zealand’s Q1 2025 Westpac Consumer Survey, which indicated weakening consumer confidence.
Westpac New Zealand reported that its confidence index dropped to 89.2 in Q1 from 97.5 in the previous period, the lowest level since Q2 2024. The decline reflects mounting trade tensions, persistent cost-of-living pressures, and financial market volatility.
However, the NZD/USD pair may find support from market optimism ahead of New Zealand’s quarterly GDP data release on Thursday. Analysts expect a modest 0.4% rebound in Q4, following two consecutive quarters of contraction.
Meanwhile, the US Dollar (USD) remains firm, underpinned by stable Treasury yields as investors await the Federal Reserve’s (Fed) interest rate decision later in the day. Markets widely anticipate the Fed will hold rates steady amid ongoing inflation concerns and economic uncertainty.
The US Dollar Index (DXY) trades near 103.30, while US 2-year and 10-year Treasury yields stand at 4.04% and 4.29%, respectively. However, the Greenback faces pressure from weak US economic data and renewed tariff threats from President Donald Trump, adding to market uncertainty.
Traders are closely monitoring the Fed’s updated economic projections for insights into the future path of US interest rates. Any hawkish signals could further strengthen the USD against its counterparts.
New Zealand Dollar FAQs
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.
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.
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.
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.