The NZD/USD pair saw a slight increase on Thursday, reaching the 0.5930s, thanks to a boost in global market sentiment. This positive trend was driven by falling Oil prices and the outcome of the US Federal Reserve’s policy meeting on Wednesday, which had a market-positive impact. Lower Oil prices benefit businesses by reducing costs and easing inflation pressures.
Despite the recent recovery, NZD/USD is expected to face ongoing challenges due to the struggling New Zealand economy. Recent data has shown a rise in the country’s Unemployment Rate to 4.3% in Q1, marking its highest level in three years. Additionally, New Zealand is technically in a recession after two consecutive quarters of negative growth. Inflation has also dipped to 4.0% in Q1, putting pressure on the Reserve Bank of New Zealand (RBNZ) to consider interest rate cuts to stimulate the economy.
Further negative data revealed a decline in Building Permits and Business Confidence, indicating ongoing challenges for New Zealand’s economic growth. The RBNZ is facing a dilemma between lowering interest rates to support growth and maintaining them to address inflation concerns. The central bank’s decision will impact NZD/USD, with the RBNZ potentially being the first to cut rates given the country’s economic struggles compared to the US Federal Reserve’s neutral stance.