Insights 
VT 
Quarterly Insights
In the first quarter of 2025, New Zealand’s GDP grew by 0.8% compared to the previous quarter. This surpassed the predicted growth of 0.7% and was an improvement from the 0.5% growth in the prior quarter.
Year-on-year, GDP showed a decrease of 0.7%. This was better than the expected decline of 0.8% and an improvement from the previously revised contraction of 1.3%.
Following the GDP release, the NZD/USD demonstrated slight fluctuations, yet there has been minimal overall change.
What we’ve seen so far in the GDP data points to a mixed reading, though the quarter-on-quarter figures paint a more optimistic picture than perhaps many had prepared for. The economy expanded at a faster rate than forecast over the first three months of the year, with growth up to 0.8%. The market had expected it closer to 0.7%, which in itself was already ahead of the previous 0.5%. This acceleration, however modest, may suggest that parts of the domestic economy are showing resilience—possibly driven by select sectors managing to sidestep broader global drags.
On a yearly basis, however, the number is still below zero. The annual contraction of 0.7% represents an economy that hasn’t yet reversed course fully from last year’s downturn. That said, it’s a smaller drop than the -1.3% previously recorded, and stronger than the consensus -0.8%, which could be seen as an early hint of stabilisation. Markets often respond more to direction over destination, and the revised upward trend here might be what many are focused on.
After the figures came out, NZD/USD hardly moved, with fluctuations amounting to little meaningful change. It points us toward a market that had largely priced in this level of performance. The lack of fresh volatility could imply traders didn’t see the figures as materially changing the outlook.
Trading Implications
For those in short-dated volatility structures or leveraged positioning, short bursts of movement without clear trend continuation can be costly. We have to start thinking more in terms of timing and selectivity, rather than momentum. The data isn’t weak enough to spark aggressive downside hedging, nor strong enough to drive upside chasing in outright directional trades. What it does, however, is potentially reinforce a broader macro narrative—one where small surprises, when aligned with better data globally, can start building investor confidence again.
From a policy standpoint, there’s little here to suggest a sudden reappraisal of cash rate expectations in either direction. Monetary authorities will want to see more than one quarter’s worth of outperformance—especially in light of the still-negative year-on-year print. The path forward for rates remains more or less balanced, and any repricing is unlikely unless consumption data or inflation metrics push the envelope. Still, there could be chances in relative rate spreads rather than in the outright direction of the kiwi itself.
We’re likely entering a period where option positioning should pay close attention to realised volatility levels, not just implieds. The muted currency reaction underscores this. If price movement stays range-bound, selling vol might outperform vega-long strategies. Calendar spreads, particularly those straddling local data prints and offshore macro events, could see better return profiles than attempts at timing breakout trades.
The macro tone hasn’t fundamentally shifted, but the path of less resistance may be tilting slightly away from pessimism. Risk sensitivity appears muted for now. Be ready for stops to tighten throughout the next few weeks unless something more definitive jolts trend conviction.
