New Zealand dollar soars on New Zealand retail sales, US fisacal concerns

The New Zealand dollar has surged on Friday. In the European session, NZD/USD is trading at 0.5950, up 0.90% on the day.

New Zealand ended the week on a high note, as retail sales climbed 0.8% q/q in the first quarter. This crushed the market estimate of 0.1% and follows an upwardly revised 1% gain in Q4 2024. The gain was driven by stronger sales in motor vehicles and parts, pharmaceuticals and clothing.

Annualized, retail sales gained 0.7%, above the upwardly revised 0.2% gain in Q4 and above the market estimate of -0.3%. This was just the second quarterly gain since Q3 2022, reflective of the slow recovery for New Zealand's economy.

Reserve Bank likely to cut rates next week

The Reserve Bank of New Zealand meets next week and is widely expected to lower rates by a quarter-point 3.25%. The impressive retail sales numbers aren't likely to change the Reserve Bank's decision. The central bank remains anxious about escalating trade tensions, which have created huge uncertainty due to the unpredictable Donald Trump. New Zealand is highly dependent on exports and the chill in the global trade environment could prove a major setback for the fragile New Zealand economy.

There are no key US releases today but we'll hear from three FOMC members. There has been a lot of Fedspeak this week, with a message that the US tariffs will take a toll on the US economy, even with the temporary deal with China, and that the Fed favors a wait-and-see stance before further rate cuts. The Fed hasn't lowered rates since Dec. 2024 and is virtually certain to hold rates at the June meeting. The second half of the year will likely see some rate cuts, but that will depend on inflation, the US labor markets and US tariff policy.

The New Zealand dollar has also received a boost as concerns over US fiscal policy have sent the US dollar broadly lower today. There are concerns that Trump's tax cut and spending bill will greatly boost the deficitand US 20-year Treasury yields have risen after a weak 20-year Treasury bond sale.

NZD/USD Technical

NZD/USD Technical

• NZD/USD has pushed above resistance at 0.5914 and is testing 0.5933. The next resistance line is 0.5967
• 0.5880 and 0.5861 and the next support levels