Insights 
VT 
New Zealand’s business confidence index, as reported by ANZ, dropped from 73.6 in December to 64.1 in January. This decline suggests businesses are adopting a more cautious outlook amid persistent economic challenges.
While optimism persists in certain sectors, the overall sentiment has weakened. This shift could influence decisions regarding future investments and spending. Observers will be monitoring upcoming economic indicators and government actions that may affect both business conditions and consumer confidence in New Zealand.
Impact Of Dropping Business Confidence
This morning’s drop in New Zealand business confidence from a high of 73.6 to 64.1 is a clear signal that the economic outlook is softening. For us, this suggests the New Zealand dollar’s recent strength may be topping out. We should prepare for increased volatility and a potential downward trend for the Kiwi in the coming weeks.
The data becomes more compelling when we consider it alongside recent inflation figures, which showed a welcome drop to 4.7% in the final quarter of 2025. This easing price pressure, combined with weakening business sentiment, gives the Reserve Bank of New Zealand a reason to pivot away from its hawkish stance. The market will now begin to more seriously price in the possibility of interest rate cuts later this year, something that seemed unlikely just a few months ago.
Given this, we see an opportunity in the currency markets through derivatives. Buying put options on the NZD/USD is a straightforward way to position for a potential decline while managing risk. A fall in the Kiwi seems likely as interest rate expectations shift against it.
Comparisons To Past Economic Trends
This situation feels similar to what we observed back in 2024, when the full impact of the RBNZ’s aggressive rate-hiking cycle began to weigh on business activity. Back then, initial signs of a slowdown preceded a longer period of economic cooling. We should view this confidence report as a potential early warning for a similar pattern developing now.
This outlook also has implications for the local equity market and interest rate swaps. Hedging long equity positions with NZX 50 index futures could be a prudent move against a potential downturn in company profits. Simultaneously, traders could look at receiving fixed rates in the swaps market to capitalize on the growing expectation of lower official cash rates.
