NZD/USD eased to about 0.5960 in early Asian trade on Friday, with the pair weakening to near 0.5950. The move followed a dovish hold by the Reserve Bank of New Zealand (RBNZ), while attention turned to US data due later in the day.
The RBNZ kept the Official Cash Rate unchanged at its February meeting, the first decision under Governor Anna Breman. Breman shifted expectations for the next possible rate rise to late 2026 or early 2027.
Inflation Outlook And Rbnz Guidance
Breman said the return to 2% inflation has been uneven, but inflation is expected to be back within the 1% to 3% target band in Q1. The RBNZ targets inflation near the 2% mid-point over the medium term.
The US Dollar found support from hawkish Federal Reserve minutes and firmer US figures. Initial jobless claims fell to 206K for the week ending February 14, versus 225K expected and a prior revised 229K.
Later on Friday, markets will monitor preliminary Q4 US GDP and Personal Consumption Expenditures data. Weaker results could weigh on the US Dollar and limit further NZD/USD declines.
Given the Reserve Bank of New Zealand’s dovish stance, we see a clear divergence in monetary policy compared to the more hawkish Federal Reserve. This policy gap suggests the path of least resistance for NZD/USD is lower over the coming weeks. We believe positioning for further weakness in the Kiwi is the most logical approach.
Key Risks And Levels
This view is strengthened by recent US economic data, as the core Personal Consumption Expenditures (PCE) price index for January 2026 came in at 2.9%, showing inflation remains sticky and well above the Fed’s target. This contrasts sharply with the RBNZ’s expectation that New Zealand’s inflation is already returning to its 1-3% target band. The strength in the US jobs market seen throughout late 2025 continues to give the Fed cover to maintain higher rates for longer.
Adding to the pressure on the Kiwi, recent Global Dairy Trade auctions have seen prices dip by 1.5%, weakening a key source of New Zealand’s export income. China’s economic performance has also been underwhelming, with manufacturing PMI data hovering just above the 50-point mark, suggesting demand for New Zealand’s goods is not accelerating. These factors remove significant pillars of support for the currency.
For traders, this outlook makes buying NZD/USD put options with expiries in March and April 2026 an attractive strategy. This allows us to capitalize on a potential move lower while limiting our maximum risk to the premium paid for the options. The current environment of increasing policy divergence makes this a compelling trade.
We will be watching the 0.5950 level as a key technical support that, if broken, could lead to a test of the lows near 0.5800 seen during the third quarter of 2025. This historical price action provides a reasonable near-term target for bearish positions. The market’s memory of those previous lows will likely influence trading activity as we approach them.
However, we must monitor the upcoming US Q4 Gross Domestic Product (GDP) data closely. A surprisingly weak reading could quickly unwind US Dollar strength and cause a sharp rebound in the pair, challenging our bearish thesis. Any unexpected stimulus measures from China could also provide a sudden boost to the New Zealand Dollar.
