NZD/USD slipped to around 0.5960 in early Asian trade on Friday and later weakened toward 0.5950. The move followed a dovish hold from the Reserve Bank of New Zealand (RBNZ), while traders looked ahead to US data due later in the day.
The RBNZ left the Official Cash Rate unchanged at its February meeting, the first decision under Governor Anna Breman. Breman pushed back expectations for the next possible rate hike to late 2026 or early 2027.
Inflation Outlook And Rbnz Guidance
Breman said the path back to 2% inflation has been uneven. Even so, inflation is expected to return to the 1% to 3% target band in Q1. The RBNZ aims to keep inflation near the 2% mid-point over the medium term.
The US Dollar found support after hawkish Federal Reserve minutes and stronger US data. Initial jobless claims fell to 206K for the week ending February 14, compared with 225K expected and a prior reading revised to 229K.
Later on Friday, markets will follow preliminary Q4 US GDP and Personal Consumption Expenditures (PCE) data. If the numbers are weaker than expected, the US Dollar could soften and NZD/USD losses may be limited.
With the RBNZ sounding more dovish and the Federal Reserve staying more hawkish, monetary policy is diverging. This gap suggests NZD/USD is more likely to drift lower in the coming weeks. We think positioning for further Kiwi weakness is the most sensible approach.
Key Risks And Levels
This view is supported by recent US data. The January 2026 core PCE price index rose 2.9%, showing inflation remains sticky and well above the Fed’s target. That contrasts with the RBNZ’s view that New Zealand inflation is already moving back into its 1% to 3% target band. The strong US labour market through late 2025 also gives the Fed room to keep rates higher for longer.
The Kiwi is also facing added headwinds. Global Dairy Trade auction prices recently fell 1.5%, reducing a key source of export income for New Zealand. China’s growth has been soft as well, with manufacturing PMI just above 50, suggesting demand for New Zealand goods is not picking up. Together, these factors weaken support for the currency.
For traders, buying NZD/USD put options expiring in March and April 2026 looks attractive. This strategy can benefit from a move lower, while limiting risk to the premium paid. With policy divergence increasing, the trade case remains strong.
We are watching 0.5950 as an important support level. A clear break could open the door to a retest of the Q3 2025 lows near 0.5800. Those prior lows may draw interest again as price approaches them.
Even so, the upcoming US Q4 GDP release is a key risk. A much weaker result could quickly reduce US Dollar strength and trigger a sharp rebound in NZD/USD, challenging a bearish view. Surprise stimulus from China could also lift the New Zealand Dollar.
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