Analysis of New Zealand Dollar Trend
2025-02-05
■ If the deterioration of employment data is further confirmed, the Reserve Bank of New Zealand may cut interest rates sharply for three consecutive times.
■ It is difficult to expect a spontaneous rebound of the New Zealand dollar in the short term, and the 55-day moving average may become an upper resistance.
Tomorrow, Statistics New Zealand will release employment data for the fourth quarter of 2023 (October-December). Market forecasts show that the unemployment rate is expected to rise by 0.3 percentage points to 5.1%, reaching the highest level since the third quarter of 2020. The number of employed people fell by 0.2% month-on-month, decreasing for two consecutive quarters; and the labor force participation rate is expected to fall to 71.1%. In addition, the year-on-year growth rate of the labor cost index is slow to 3.0%. Although the consumer price index (CPI) released on January 22 rose by 2.2% year-on-year, higher than the 2.1% expected by the Reserve Bank of New Zealand (RBNZ), it has been within the central bank's target range (1%-3%) for two consecutive quarters.
Since August last year, the RBNZ has cut interest rates by 1.25%. The RBNZ decided to cut interest rates for the fourth consecutive time at the monetary policy meeting on February 19 if the weakness in the job market is confirmed again. According to the quarterly financial policy report in November last year, the RBNZ predicts that the policy rate will be reduced from the current 4.25% to 3.8% by the end of June 2025, and further to 3.6% by the end of December 2025, indicating that the pace of monetary easing in the future may slow down.
The depreciation of the New Zealand dollar will bring inflation risks through rising import prices, however, the New Zealand economy has fallen into recession, with real GDP falling by 1.0% month-on-month in the third quarter of last year, and negative growth for two consecutive quarters. In addition, the impact of the Trump administration's tariff policy and the uncertainty of the global economic outlook remain. Against this background, we expect the RBNZ to continue to cut interest rates by 0.50% at the February meeting, bringing the policy rate to 3.75%.
Yesterday, the New Zealand dollar fell to 0.5515 against the US dollar and 85.69 against the Japanese yen, the lowest levels in 2 years 4 months, and 6 months respectively. But then, due to the postponement of the US tariffs on Mexico and Canada, the strength of the US dollar and the Japanese yen temporarily eased, and the New Zealand dollar rebounded above 0.56 US dollars in the Asian session this morning and rebounded above 87 yen against the Japanese yen. However, considering the deteriorating job market and economic recession, it is difficult for the New Zealand dollar to rebound spontaneously in the short term, and the 55-day moving average (0.5712 US dollars, 88.56 yen) may become the upward resistance level of the New Zealand dollar.
■ It is difficult to expect a spontaneous rebound of the New Zealand dollar in the short term, and the 55-day moving average may become an upper resistance.
Tomorrow, Statistics New Zealand will release employment data for the fourth quarter of 2023 (October-December). Market forecasts show that the unemployment rate is expected to rise by 0.3 percentage points to 5.1%, reaching the highest level since the third quarter of 2020. The number of employed people fell by 0.2% month-on-month, decreasing for two consecutive quarters; and the labor force participation rate is expected to fall to 71.1%. In addition, the year-on-year growth rate of the labor cost index is slow to 3.0%. Although the consumer price index (CPI) released on January 22 rose by 2.2% year-on-year, higher than the 2.1% expected by the Reserve Bank of New Zealand (RBNZ), it has been within the central bank's target range (1%-3%) for two consecutive quarters.
Since August last year, the RBNZ has cut interest rates by 1.25%. The RBNZ decided to cut interest rates for the fourth consecutive time at the monetary policy meeting on February 19 if the weakness in the job market is confirmed again. According to the quarterly financial policy report in November last year, the RBNZ predicts that the policy rate will be reduced from the current 4.25% to 3.8% by the end of June 2025, and further to 3.6% by the end of December 2025, indicating that the pace of monetary easing in the future may slow down.
The depreciation of the New Zealand dollar will bring inflation risks through rising import prices, however, the New Zealand economy has fallen into recession, with real GDP falling by 1.0% month-on-month in the third quarter of last year, and negative growth for two consecutive quarters. In addition, the impact of the Trump administration's tariff policy and the uncertainty of the global economic outlook remain. Against this background, we expect the RBNZ to continue to cut interest rates by 0.50% at the February meeting, bringing the policy rate to 3.75%.
Yesterday, the New Zealand dollar fell to 0.5515 against the US dollar and 85.69 against the Japanese yen, the lowest levels in 2 years 4 months, and 6 months respectively. But then, due to the postponement of the US tariffs on Mexico and Canada, the strength of the US dollar and the Japanese yen temporarily eased, and the New Zealand dollar rebounded above 0.56 US dollars in the Asian session this morning and rebounded above 87 yen against the Japanese yen. However, considering the deteriorating job market and economic recession, it is difficult for the New Zealand dollar to rebound spontaneously in the short term, and the 55-day moving average (0.5712 US dollars, 88.56 yen) may become the upward resistance level of the New Zealand dollar.