In July 2025, New Zealand’s imports increased to 7.28 billion NZD, up from 6.5 billion NZD. Exports also saw a rise, reaching 6.71 billion NZD from 6.6 billion NZD in the previous period.

Trade Balance Overview

The trade balance now shows a deficit of 578 million NZD, compared to a surplus of 142 million NZD from before. This change marks a significant shift, with New Zealand spending much more on imports than it earns from exports. This situation suggests a weaker outlook for the New Zealand dollar (NZD). To take advantage of a declining NZD in the coming weeks, we might consider strategies like buying put options on the NZD/USD currency pair or selling NZD futures contracts. The data indicate that the surge in imports far exceeds the slight rise in exports, often leading to currency depreciation. The drop in exports is not surprising. July 2025 data showed that China’s manufacturing PMI fell to 49.8, indicating a slight contraction. Since China is a major market for our goods, their slowdown has a direct effect on our export income. However, a weaker NZD would eventually make our exports cheaper and more appealing. Strong import numbers suggest high domestic demand, which could push inflation higher. The latest CPI data from Statistics NZ in July 2025 shows inflation holding steady at 4.2%, well above the Reserve Bank of New Zealand’s (RBNZ) target. This places the RBNZ in a challenging position.

Interest Rate Considerations

We should keep an eye on interest rate movements. The strong domestic economy may compel the RBNZ to consider raising rates to combat inflation, despite the negative trade balance. We can use options on interest rate swaps to prepare for potential volatility ahead of the next RBNZ meeting. Historically, we saw a similar pattern during the 2021-2022 period, when a post-pandemic surge in domestic demand significantly widened the trade deficit, leading to prolonged weakness in the Kiwi dollar. This current trend may have similar momentum that lasts longer than just a few weeks. Create your live VT Markets account and start trading now.

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