- NZD/USD drifted to almost 0.5820 in early Asian sessions on Wednesday.
- New Zealand’s Bip rose more than expected in the fourth quarter with a 0.7% QOQ.
- The Fed has stabilized interest rates and is seeing two cuts this year as well.
NZD/USD Trades Higher Amid New Zealand’s Economic Recovery
The NZD/USD pair remains in positive territory, trading around 0.5820 during the early Asian session on Thursday. The New Zealand Dollar (NZD) strengthens following robust economic growth data for the fourth quarter of 2024. However, the pair’s upward momentum may be capped as the Federal Reserve (Fed) holds its interest rates steady, providing support for the US Dollar (USD).
New Zealand’s GDP Exceeds Expectations
According to data from Statistics New Zealand, the country’s Gross Domestic Product (GDP) expanded by 0.7% quarter-over-quarter (QoQ) in Q4, rebounding from a revised -1.1% contraction in the previous quarter. This figure surpassed market expectations of 0.4%. On an annual basis, GDP contracted by 1.1% after a 0.3% decline in Q3, but still performed better than the projected 1.4% drop.
Kiwibank Chief Economist Jarrod Kerr stated that New Zealand is gradually emerging from recession. The Kiwi strengthened slightly in response to the optimistic GDP data.
Federal Reserve Holds Rates Steady
At its March meeting on Wednesday, the Fed maintained its federal funds rate in the 4.25%–4.5% range, aligning with market forecasts. The central bank reaffirmed its expectation of two rate cuts later this year but highlighted economic uncertainties, particularly related to US President Donald Trump’s trade policies.
Fed’s Hawkish Stance Supports US Dollar
During a press conference, Fed Chair Jerome Powell emphasized that labor market conditions remain strong, while inflation continues to move closer to the central bank’s 2% target, though it is still somewhat elevated. The Fed’s cautious approach and hawkish commentary could strengthen the Greenback, potentially limiting further gains for the NZD/USD pair in the near term.
