While the RBNZ is now firmly on hold and increasingly dovish in tone, the Fed remains reluctant to commit to cuts amid persistent inflation. U.S. core CPI at 2.9% YoY and upside surprises in services inflation justify the Fed's caution fueling a widening policy gap that favors continued USD appreciation.

Economic data out of New Zealand has been consistently soft, with consumer confidence, housing activity, and retail spending all under pressure. Growth is stagnating, while inflation is moderating — exactly the kind of backdrop where NZD loses appeal as a yield or growth proxy.

Like AUD, the NZD is highly exposed to China through trade channels (especially dairy and soft commodities). With ongoing concerns around China’s property sector and subdued stimulus, external demand for New Zealand exports remains tepid. This acts as a drag on NZD valuations.

NZD/USD has failed to hold above key support at 0.59683 and is now trading below 0.59560 a psychologically important level. A confirmed break of 0.5940 opens the way toward 0.5920 and potentially 0.5900, especially if U.S. data continues to surprise to the upside.

Structural weakness in New Zealand's economy

Unless there's a reversal in U.S. inflation or a surprise shift from the Fed, NZD/USD remains a compelling short on rallies.

SHORT NZDUSD

Jul 16 2025