The NZD/USD pair extended its pullback on Thursday, slipping from the recent one-week high around 0.5965-0.5970 to trade near 0.5920 in the Asian session. The drop followed the release of New Zealand’s latest Budget, which highlighted fiscal prudence and a narrower projected deficit of NZ$14.74 billion for the fiscal year ending June 2025, improving from the previous forecast of NZ$17.32 billion in December.
While the fiscal tightening aims to support economic stability amid ongoing trade uncertainties, it also increased market expectations for further rate cuts by the Reserve Bank of New Zealand (RBNZ), weighing on the Kiwi dollar and pressuring the NZD/USD pair.
Despite this, the downside remained limited due to the persistent US Dollar (USD) selling bias. Concerns that US President Donald Trump’s proposed “One Big, Beautiful Bill” could significantly worsen the US budget deficit, combined with growing consensus that the Federal Reserve will reduce borrowing costs later this year amid easing inflation and a sluggish economy, pushed the USD to a two-year low. This weakness helped cushion losses for the NZD/USD pair.
However, Kiwi bulls may remain cautious amid renewed US-China trade tensions, which typically undermine demand for commodity-linked antipodean currencies like the New Zealand dollar. China recently accused the US of abusing export control measures and violating Geneva trade agreements after Washington issued guidance against using Huawei’s Ascend AI chips, raising further uncertainties.
Overall, while the NZD/USD pair finds some support from USD weakness, geopolitical risks and expectations of RBNZ easing suggest a cautious trading environment ahead.
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