Kiwi dollar slips on weak Q2 GDP, markets turn cautious ahead of US data

Daily Currency Update

The NZD/USD pair edged down to near 0.5935 during the early Asian session on Thursday, as disappointing economic data from New Zealand weighed on the Kiwi. The weaker-than-expected GDP report added to concerns about the country’s growth outlook, while investors await key US economic indicators later in the day, including weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Index and the Conference Board Leading Economic Index. Statistics New Zealand released its GDP figures for the second quarter (Q2), showing a 0.9% contraction compared to the previous quarter. This was a stark reversal from the 0.9% expansion recorded in Q1, which was revised upward from an initial estimate of 0.8%. The Q2 contraction also significantly missed the market consensus, which forecasted a smaller decline of just 0.3%. On a year-over-year basis, New Zealand’s economy shrank by 0.6% in Q2, matching the revised 0.6% contraction in Q1 but falling short of the expected zero growth. These sobering figures highlight the challenges facing New Zealand’s economy amid a global slowdown and domestic headwinds. The data is likely to reinforce the Reserve Bank of New Zealand’s (RBNZ) current dovish stance. Market participants are increasingly pricing in the likelihood of two additional 25 basis point rate cuts before the end of the year as the central bank seeks to stimulate growth and counteract weakening economic momentum. The prospect of further monetary easing is creating downward pressure on the NZD/USD pair, as expectations of lower interest rates tend to weigh on the currency’s appeal. Additionally, the pair is influenced by broader risk sentiment and the relative strength of the US dollar ahead of important US economic data releases scheduled later on Thursday. Traders will be watching closely for the weekly US Initial Jobless Claims, a key gauge of the labor market’s health, alongside the Philadelphia Fed Manufacturing Index and the CB Leading Economic Index, which provide insight into economic activity and future growth prospects in the United States. Positive US data could bolster the USD, further pressuring the Kiwi, while weaker numbers might ease some of the downward momentum.