The NZD/USD pair extended its losing streak on Thursday following the release of the New Zealand Yearly Budget by the Treasury. The pair was trading around 0.6100 during European hours, with the New Zealand Government outlining plans to rebuild the economy, ease the cost of living, and improve health and education services, among other priorities. Finance Minister Nicola Willis stated that the budget includes savings of $23 billion over four years to fund tax relief and boost frontline services, with a focus on infrastructure investment for future growth and resilience.
The New Zealand Treasury projects inflation to fall below 3% in the third quarter and ease to 2% by 2026. They also anticipate GDP contraction in the first half of 2024, with growth expected in the latter half of the year. These projections have had an impact on the NZD/USD pair, with the Kiwi currency facing downward pressure amidst the budget release.
On the other hand, the US Dollar has been influenced by hawkish remarks from Federal Reserve officials, raising concerns about potential rate hikes and fueling risk aversion sentiment. This has supported the USD and undermined the NZD/USD pair in recent trading sessions. However, a downward correction in US Treasury yields has limited the downside for the pair, as traders await key economic data releases from the US.
Traders are closely watching for the release of the US Gross Domestic Product Annualized data for the first quarter on Thursday, as well as the Core Personal Consumption Expenditures Price Index data on Friday. These data points could provide further direction for the NZD/USD pair, with any surprises potentially leading to increased volatility in the currency pair.
Overall, the NZD/USD pair continues to face downside pressure following the release of the New Zealand Yearly Budget and projections from the Treasury. While the US Dollar has been supported by hawkish Fed comments, a correction in Treasury yields has limited the losses for the pair. Traders are monitoring upcoming economic data releases from the US for further guidance on the future direction of the NZD/USD pair.
