The NZD/USD currency pair strengthened to around 0.5880 during Asian trading hours on Friday, driven by a narrower-than-expected New Zealand trade deficit [1]. According to Statistics New Zealand, the country recorded a monthly trade deficit of NZ$257 million in February, significantly lower than the NZ$627 million deficit in January and below market expectations of a NZ$470 million shortfall [1]. This positive trade data provided support for the New Zealand Dollar against the US Dollar.
However, the upside for NZD/USD may be limited due to weaker-than-expected GDP growth in New Zealand. The economy expanded by 0.2% quarter-on-quarter in Q4, compared to a revised 0.9% in Q3, missing the forecast of 0.4% [1]. On a year-on-year basis, GDP grew by 1.3% in Q4, falling short of the 1.7% growth forecast and slightly below the revised 1.1% increase in Q3 [1].
On the US side, the Federal Reserve maintained its target range for the federal funds rate at 3.50-3.75% on Wednesday, as expected. Fed policymakers signaled a quarter-point rate cut by the end of the year, consistent with their previous projections from December [1].
Traders are also monitoring the ongoing conflict in the Middle East, which could impact the NZD/USD pair, although no specific market reaction was detailed in the article [1].
CONCLUSION
The NZD/USD pair rose on the back of stronger trade data, but gains may be capped by weaker GDP figures. While the Fed's rate outlook remains unchanged, external geopolitical risks could influence future movements. Overall, the market reaction is cautiously optimistic, with medium impact expected.