Insights 
VT 
New Zealand’s trade balance year-over-year in December dropped, with the deficit widening from $-2.06 billion to $-2.2 billion. This decrease points to challenges in New Zealand’s export sector amid global economic strains.
Various market analyses and reports explore trends in commodities, currencies, and the broader economic climate. Discussions cover trade dynamics and forecasts for the next financial period, as economic indicators influence trading strategies.
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Looking back to early 2025, we noted that New Zealand’s year-over-year trade deficit for December 2024 had worsened to $-2.2 billion. This data point confirmed a trend of underperformance in the export sector that was concerning at the time. That pattern has continued to influence our currency expectations.
That fundamental weakness persists into the start of 2026, with the latest figures for the year ended December 2025 showing an annual trade deficit of $12.9 billion. With the Reserve Bank of New Zealand holding the Official Cash Rate firm at 5.50% to manage inflation, the high cost of borrowing is also weighing on economic activity. These combined factors suggest sustained pressure on the New Zealand dollar (NZD).
Currency Strategy Implications
For the coming weeks, we should consider strategies that benefit from a weaker Kiwi. This includes buying put options on the NZD/USD pair, particularly with strike prices below the key 0.6000 psychological level. Short-selling NZD futures contracts could also provide direct exposure to this bearish outlook.
The economic divergence with Australia, which continues to post trade surpluses on the back of its resource exports, is also a key factor. This fundamental mismatch reinforces the case for being long on the AUD/NZD currency cross. We see potential for the pair to break higher, and call options on AUD/NZD could offer a leveraged way to trade this view.
We must remain attentive to the next Global Dairy Trade auction, as any significant drop in dairy prices would further weaken the NZD. The RBNZ’s next monetary policy statement will also be critical. Any signal that interest rate cuts are coming sooner than expected would likely accelerate a downward move in the currency.
