The NZD/USD pair dropped to around 0.5640, its lowest since April, during the early Wednesday session in Asia. This drop followed an unexpected rise in New Zealand’s unemployment rate to 5.3% in the third quarter, the highest in nine years. Statistics New Zealand indicated that employment stayed the same, missing the anticipated 0.1% growth. Since August last year, the Reserve Bank of New Zealand (RBNZ) has cut the Official Cash Rate by 300 basis points, bringing it down to 2.5%. Another cut of 25 basis points is expected at the upcoming meeting on November 26. Even with positive signs from US-China trade discussions, the ongoing US government shutdown may weaken the Greenback against the NZD.

Impact on the New Zealand Dollar

The New Zealand Dollar’s value depends on the country’s economic conditions and central bank decisions. The performance of the Chinese economy and dairy prices heavily influence the NZD, as China is New Zealand’s largest trading partner and dairy exports are essential. High growth, low unemployment, and strong confidence boost the NZD, while risk sentiment plays a role; the NZD tends to strengthen when investors are willing to take risks. With the NZD/USD slipping below 0.5650, our main concern is the weak labor market in New Zealand. The unemployment rate of 5.3% is notable and shows a decline we’ve observed since rates were in the low 4s back in 2024. This poor data suggests the Kiwi might weaken further, making put options a solid choice. The RBNZ’s cautious approach is another important factor to monitor. With an interest rate cut likely on November 26, the gap between US and New Zealand monetary policy could widen. Derivative markets have already priced in an over 80% chance of this cut, indicating that betting against the Kiwi is becoming a common strategy.

US Economic Outlook

While the extended US government shutdown creates some uncertainty for the US dollar, we’re paying close attention to new economic data. The US ISM Services PMI, which has mostly stayed above 52 for the past year, could highlight the strength of the US economy. A strong reading may overshadow concerns related to the shutdown and could influence the NZD/USD pair. Positive developments in US-China trade are important, but we see their ability to support the Kiwi as limited. This is similar to previous times when a dovish RBNZ had a stronger impact than general market sentiment. The immediate effect of a potential rate cut is likely a more significant factor for the currency than any indirect benefits from improved trade relations. Create your live VT Markets account and start trading now.

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