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    New Zealand’s economy shrinks by 0.9% in Q2, disappointing expectations and negatively impacting NZD/USD

    by VT Markets
    /
    Sep 17, 2025
    **New Zealand Industry Impact** After the latest report, the NZD/USD currency pair saw a small drop. The Reserve Bank of New Zealand had predicted a smaller decline of 0.3% for the quarter. This GDP data shows that the New Zealand economy is doing worse than expected. Growth has fallen three times more than the Reserve Bank predicted, indicating that the central bank is falling behind. This raises the chances of an interest rate cut at their next meeting. The overall weakness isn’t surprising, especially since the U.S. government increased agricultural tariffs in August 2025. This has directly affected our dairy and meat exports. Additionally, recent data from the Real Estate Institute of New Zealand showed that Auckland house prices dropped another 1.2% in August, marking the sixth month in a row of price declines. This mix of outside and inside pressures is creating a tough situation for the economy. **Option Strategy Analysis** In the weeks ahead, we recommend buying NZD/USD put options that expire after the RBNZ’s October policy meeting. This strategy allows for downside protection with controlled risk, preparing for a significant drop if the RBNZ issues a dovish statement or cuts rates. Implied volatility remains relatively low, making option prices attractive before the market fully adjusts to this new economic situation. We’ve seen this scenario before. During the post-pandemic slowdown in 2022, weak economic data led to a quick decline in the currency’s value. GDP has now dropped in three of the last five quarters, indicating this isn’t just a temporary downturn but rather a deeper recession. This suggests that interest rate futures markets are not fully accounting for the possibility of multiple cuts before the end of the year. Create your live VT Markets account and start trading now.

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