Safe Haven Demand And Upcoming Data
Ongoing tension has supported demand for safe-haven assets, which can lift the US Dollar and weigh on NZD/USD. The February US employment report is due later on Friday and may affect rate expectations. The Reserve Bank of New Zealand kept interest rates unchanged at its February meeting and pointed to an accommodative stance. Markets are pricing a low chance of rate rises until late 2026. US payrolls are expected to increase by 59,000 in February. The Unemployment Rate is forecast to stay at 4.3%, and weaker results could reduce support for the US Dollar versus the New Zealand Dollar. We remember this time last year, around March 2025, when escalating conflict in the Middle East drove a significant flight to safety into the US Dollar. The situation has stabilized since the Riyadh Accord was signed last November, reducing the geopolitical risk premium that was priced into the greenback. This calmer backdrop allows us to focus more on central bank policy.Central Bank Policy And Trading Approach
At that time in 2025, we were looking at a very weak US jobs report, with February’s number coming in at just 35,000 against a 59,000 expectation. Today, the picture is reversed, with last month’s data for February 2026 showing a robust 210,000 jobs added and unemployment falling to 3.8%. This has put pressure on the Federal Reserve to consider a more hawkish stance in the coming months. The Reserve Bank of New Zealand was signaling an accommodative stance back in early 2025, a view that held through their mid-year rate cut. However, with New Zealand’s latest quarterly inflation figures for Q4 2025 clocking in at a sticky 3.5%, the RBNZ’s dovishness is now being questioned. We anticipate a shift in tone at their next meeting, which could support the Kiwi dollar. Given the shifting fundamentals, we see potential for NZD/USD to test higher levels, despite the Fed’s renewed strength. Traders should consider buying call options on the pair to capitalize on potential upside while defining their maximum risk. Implied volatility has been moderate, suggesting option premiums are not excessively expensive at these levels. Create your live VT Markets account and start trading now.
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