Published: May 21st, 2025
The New Zealand dollar (NZD) is forecast to stay under pressure over the next two to four months, despite ongoing softness in the US Dollar, according to a new analysis from Commerzbank.
Published on Monday, an investor briefing from the bank’s currency strategy unit calls for the Kiwi’s near-term movements to be muted against the Greenback, but sharper weakening is expected against the Euro, caused by a mix of domestic and macro headwinds.
Cooling business sentiment, rising inflation, and a weaker labour market are all expected to weigh on NZD’s prospects.
Commerzbank’s analysts noted that consumer confidence is on the upswing, but remains stubbornly below pre-COVID levels. Falling demand for New Zealand exports from China, paired with structural issues like low productivity growth, are also expected to cap NZD’s upside.
More interest rate cuts are expected from the Reserve Bank of New Zealand (RNBZ) and new risks to dairy exports could be on the horizon. The Kiwi's prospects look to have tilted firmly to the negative.
Key takeaways from Commerzbank's analysis:
The Kiwi will exhibit weakness regardless of softness in the American Dollar, with declines against the Euro expected to be more pronounced.
The NZD/USD exchange rate will hold at around 0.58 through the end of this year, while EUR/NZD is expected to hit 2.01 by Q3 2026.
Tariff tensions mean business sentiment is declining in key domestic sectors exposed to New Zealand's reliance on exports
Consumer confidence is improving, but still has a long way to go before it returns to pre-pandemic levels.
In March 2025, Figures from Statistics New Zealand showed that the island nation's economy grew by 0.7 per cent in the final quarter of 2024.
Confirmation that it had left a period of downturn behind should have bolstered NZD and given the Reserve Bank of New Zealand (RBNZ) cover to stop cutting interest rates. Yet traders seem intent on ignoring the good news.
The Pound-to-New Zealand Dollar rate (GBP/NZD) was up by half a percent on Monday, March 24th, reaching 2.2479. EUR/NZD was also 0.56% higher at 1.8849.
Analysts say an Australian Dollar sell off sparked by surprisingly poor labour market data is holding NZD back.
An investor note from Commonwealth Bank of Australia said ‘NZD/USD dropped by close to 0.5 per cent in parallel with a lower AUD.’
On the same day New Zealand's quarterly GDP numbers were published, Australian employment data were released showing a significant 52.7k drop in February. Consensus was looking for a 30k lift
The Down Under labour market data spurred traders to raise expectations for a faster cycle of interest rate cuts by the Reserve Bank of Australia (RBA).
The shift in posture has dragged Australian bond yields down, with a correlated effect on New Zealand bond yields. Both NZD and AUD have been pulled lower by dipping bond yields in their respective countries.
Overall, forex traders see slower Australian growth as a bad sign for New Zealand's economy, despite the upbeat Q4 GDP reading.
A market analysis by Auckland-based ASB said New Zealand's growth drivers in Q4 will struggle to sustain momentum given a backdrop of global headwinds.
The New Zealand Dollar had been forecast to gain against most G10 majors into the middle of 2025, according to a January analysis by Sydney-based Westpac.
An improving international growth backdrop and a US Dollar set to trend lower will benefit the Kiwi, though Westpac analysts say forex traders should also watch for an uptick in New Zealand's economic growth as the Reserve Bank of New Zealand's (RBNZ) current policy of restrictive interest rates could loosen in the next few months.
‘Auckland central bankers started the RBNZ's easing cycle ahead of some G10 peers and seem intent on moderating that approach ahead of what traders had expected. There has been a notable loosening of financial conditions as retail and wholesale interest rates have moved to levels not seen in years,’ Westpac wrote.
Despite past signals to the contrary, the RBNZ was thought to be comfortable with relaxing interest rates on an accelerated timeline.
‘As headline CPI inflation is predicted to stay around the mid-point of policymakers’ 1-3 per cent target range during the third quarter, the RBNZ sees an environment where they have more freedom to respond to weakening economic indicators.’
Financial conditions in New Zealand had eased at the end of the year, with short-term swap rates falling to around 100 basis points, while mortgage rates dropped by 50-100 basis points.
Westpac analysts believed the RBNZ would likely announce two 25 basis point cuts in its two remaining 2024 meetings. The path for 2025 was naturally more speculative.
In March 2024, analysts at two of The Netherlands' largest banks said the Kiwi was on track to be one of the year's outperformers, despite some recent losses.
NZD lost ground against other majors in February after Auckland central bankers held the official interest rate at 5.50%, disappointing some forex traders who were counting on another near-term rate hike.
Guidance from the Reserve Bank of New Zealand's (RBNZ) February meeting prompted a selloff and reappraisal of New Zealand interest rate prospects, with bets firming up for a new round of cuts in the Autumn.
In a note to investors, ING Bank's FX Strategy Unit wrote that the RNBZ's statement was ‘less hawkish than expected given that another rate hike looks to be off the table for the foreseeable future. The immediate result has been losses for the New Zealand dollar.’
But ING added that traders ‘shouldn't buy into perceptions of NZD weakness.’
Over at fellow Dutch banking giant ABN AMRO, currency analysts are in broad agreement. A market analysis published the same week said ‘the New Zealand dollar is still on track to outperform’ in 2024.
