NZD Slips Despite Strong Q1 GDP as Current Account Deficit and Risk Aversion Bite

NZD Slips Despite Strong Q1 GDP as Current Account Deficit and Risk Aversion Bite

📅 Published: June 19, 2025 | 🖋️ Tredu FX Desk

NZD Underperforms Across the Board

The New Zealand Dollar (NZD) is struggling despite solid macroeconomic data, weakening against most major currencies. Mounting concerns around the country's substantial current account deficit—recorded at –5.7% of GDP in Q1—combined with a broader risk-off market sentiment, are diminishing the appeal of the Kiwi.

With foreign capital inflows drying up, it's becoming harder to fund the deficit, especially in a globally cautious investment environment.

Q1 GDP Surprises to the Upside

New Zealand’s economy performed better than expected in Q1:

• Q1 GDP (q/q): +0.8% (vs. +0.7% expected, +0.5% prior)
• RBNZ’s GDP Nowcast: +0.6%
• Key Growth Drivers: Manufacturing, business services

This expansion reinforces the Reserve Bank of New Zealand's (RBNZ) stance that monetary easing is not guaranteed in the near term.

RBNZ Stands Firm Amid Strong Data

Despite the Kiwi's poor performance, the RBNZ remains cautiously hawkish. Deputy Governor Christian Hawkesby recently stated:

“When we next meet in July, a further cut in the OCR is not a done deal.”

The strong GDP print supports this view, suggesting policymakers see resilience in the domestic economy.

Read More on Tredu:

• NZD/USD Live Chart
• RBNZ Monetary Policy Tracker
• Latest Economic Reports from New Zealand