New Zealand’s Consumer Price Index (CPI) rose by 3.1% year-on-year in the fourth quarter of 2025, surpassing the expected growth of 3.0%. This follows a 3.0% increase in the third quarter, according to Statistics New Zealand. Quarterly CPI inflation fell to 0.6% in the fourth quarter from 1.0% in the third quarter, exceeding the market forecast of 0.5%. Meanwhile, the NZD/USD pair is currently up by 0.10%, trading at 0.5908.

Understanding GDP And Economic Growth

Gross Domestic Product (GDP) measures a country’s economic growth over time. It is usually compared to the previous quarter or the same period last year. A higher GDP can strengthen a nation’s currency, supporting exports and attracting foreign investment. Economic growth leads to increased spending, which raises inflation. This can prompt higher interest rates, making investments in gold less appealing compared to cash deposits. Consequently, gold prices often drop in a strong economy. Recent inflation figures for New Zealand show a higher-than-expected increase at the end of 2025. The 3.1% annual rise is just above the Reserve Bank of New Zealand’s (RBNZ) target range of 1-3%. This ongoing inflation makes it unlikely that the RBNZ will ease its policy anytime soon. With the Official Cash Rate currently at 5.50%, this information decreases the chances of rate cuts in the first half of the year. We now need to prepare for the possibility that the RBNZ may keep its tight policies in place longer than expected. Any market hopes for immediate rate cuts will likely diminish in the coming days.

Implications For Derivative Traders

For derivative traders, this situation suggests a strategy to expect a stronger New Zealand dollar in the upcoming weeks. Purchasing NZD/USD call options set to expire in February or March could be a good way to benefit from a potential rise toward the 0.6000 level. This is because higher interest rate expectations attract foreign investment, bolstering the currency. However, weak GDP figures from the third quarter of 2025 showed a contracting economy. Despite this, the experiences of 2023 and 2024 indicate that central banks will prioritize fighting inflation, even at the cost of short-term growth. We expect the RBNZ to follow this approach. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now