New Zealand’s unemployment rate for the second quarter is at 5.2%. This is slightly better than the expected 5.3%. As a result, the kiwi dollar increased initially but pulled back before reaching its highest levels from the previous session.

Reserve Bank of New Zealand Rate Cut

The Australian dollar is also gaining, moving up alongside the kiwi. Westpac NZ predicts the Reserve Bank of New Zealand will lower the interest rate by 25 basis points on August 20. They might consider further cuts if necessary, but they haven’t specified when or if additional cuts will happen. Today, both the Kiwi and Aussie dollars are stronger following the better-than-expected unemployment rate. This good news has given both currencies a temporary boost. They are currently testing their session highs again. However, we must keep in mind that a rate cut from the Reserve Bank of New Zealand is expected on August 20. The market anticipates a 25 basis point reduction, which could put downward pressure on the kiwi dollar. This suggests that today’s strength might not last long. This anticipation of a rate cut is supported by slowing inflation, as New Zealand’s Q2 2025 CPI has dropped to 3.1%, getting closer to the RBNZ’s target range. The Official Cash Rate has been steady at 5.50% for over a year, allowing the central bank room to adjust its policy. A rate cut seems highly likely given the easing price pressures.

Trading Implications

For traders, this situation signals that the current strength in NZD/USD could be an opportunity to sell. The next two weeks might be a good time to think about buying put options on the kiwi dollar. This would allow for positioning ahead of the RBNZ’s decision and the potential decline afterward. We should remember what happened in August 2019 when the RBNZ surprised markets with a 50 basis point cut, although only a 25-point cut was expected. History shows the bank can be more aggressive than expected, which raises risks for the kiwi dollar. The rise in the Australian dollar is mostly in response to the kiwi. Since the positive news is not directly tied to Australia’s economy, the AUD/USD may also lose its recent gains if the RBNZ follows through with its expected move. This casts doubt on the sustainability of the Aussie’s current strength. Create your live VT Markets account and start trading now.

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