FX.co ★ New Zealand Dollar Holds Near 2-Week low

The New Zealand dollar stabilized around $0.597 on Friday after experiencing a drop of over 1% in the previous trading session, hitting a nearly two-week low. This decline was primarily due to a sharper-than-anticipated economic contraction, which heightened expectations of further interest rate reductions by the Reserve Bank of New Zealand. Gross domestic product (GDP) fell by 0.9% in the June quarter, a steeper decline than the predicted 0.3% decrease. This follows a revised growth of 0.9% in the prior quarter, affected notably by weakened performance in the construction and manufacturing sectors, as well as a slowdown in exports. Market participants are now fully anticipating a 25 basis point rate cut in October, while factoring in a roughly 25% probability of a more substantial 50 basis point reduction. Expectations for a cumulative easing of 71 basis points have been set, an increase from the 50 basis points forecast earlier in the week. In a separate report, data released today indicated that New Zealand's trade deficit narrowed to NZ$1.2 billion in August from NZ$2.3 billion a year earlier, although it remained broader than market predictions of NZ$0.7 billion. Over the week, the New Zealand dollar is positioned to register a decline of more than 1%.