NZD/USD dips after dovish hold from Reserve Bank of New Zealand
NZD/USD Analysis
The Reserve Bank of New Zealand kept rates unchanged at 2.25% after three straight cuts and offered dovish guidance in the first decision under new governor Breman. Officials said policy "is likely to remain accommodative for some time" as they appeared confident that inflation will return to the 1%–3% inflation target. [1]
Policymakers have good reasons to maintain an easy setting amid a cooling labour market, with unemployment rising to 5.4% in the fourth quarter, the highest level in ten years. The economy is showing signs of recovery but officials are worried that a "premature" policy normalisation could hinder this process.
The dovish hold by New Zealand's central bank weighs on the kiwi and sends NZD/USD lower - a move aided by USDOLLAR resilience after strong NFPs and a soft inflation report, which dampened macro fears. The pair is now at risk of breaking below the 38.2% Fibonacci of this year's advance, the EMA200 and the February low (0.5927), which would open the door to a deeper correction.
However, this is a strong confluence of support and holding above it would reaffirm the upside bias. This would allow NZD/USD to push for higher highs while the monetary policy differential offers a tailwind.
Despite the dovish tilt, the RBNZ may have reached the end of its easing cycle after 325 basis points of easing that have brought interest rates to three and a half year lows. Officials raised the OCR forecast to 2.4% by the end of the year [2], leaving room for a rate hike. The economy is rebounding and GDP grew by a solid 1.1% quarter on quarter in the fourth quarter. At the same time inflation accelerated to 3.1% and the central bank upgraded its 2026 forecasts.
Moreover, cooling inflation has strengthened market expectations for multiple rate cuts by the Federal Reserve, just as the next chair could be more attuned to Donald Trump's preference for lower borrowing costs. This could continue to weigh on the greenback, which faces structural challenges from erratic trade policies, a ballooning deficit and broader diversification trends.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
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