NZD/USD stays in the red above 0.5900 after NZ budget, downside appears to be cushioned

The NZD/USD is lower as New Zealand's fiscal tightening lifts bets on further interest rate cuts by the New Zealand Central Bank.
U.S. fiscal concerns and bets on a Fed rate cut have undermined the dollar and supported in stock prices.

The renewed U. S.-China trade tensions could limit any attempts by the Kiwi.

The yen/dollar pair extended the previous day's correction from 0.5965-0.5670 regional or one-week high, and attracted some follow-up selling during the Asian session on Thursday. in stock prices fell to the 0.5920 area, or new daily lows following the release of the New Zealand budget, although the downside was still somewhat eased on the back of the prevailing dollar (USD) selling bias.

The New Zealand government emphasises fiscal prudence and forecasts that the budget deficit for the fiscal year to June 2025 will narrow to NZ $14.74 billion, while the December half-year fiscal update projects a deficit of NZ $17.32 billion. At the same time, amid trade uncertainty leading to economic challenges, fiscal restraint emerged and lifted the bet on further rate cuts by the Reserve Bank of New Zealand (RBNZ). This, in turn, put some pressure on the kiwi and the NZD/USD exchange rate.

Meanwhile, the dollar sell-off bias remains unabated amid fears that US President Donald Trump's dubbed "a big and beautiful bill" will worsen the US budget deficit at a faster pace than previously expected. In addition, the US Federal Reserve (Fed) will further reduce borrowing costs this year due to easing inflationary pressures and sluggish economic growth prospects, which is increasingly accepted, which has dragged the US dollar to a two-year low. This, in turn, helped to limit losses in the NZD/USD pair.


However, New Zealand bulls may avoid making aggressive bets amid renewed US-China trade tensions, which tend to weaken demand for anti-European currencies, including New Zealand. Indeed, China has accused the United States of violating the Geneva trade agreement by abusing export controls after the United States issued guidance warning companies against using Huawei's Ascend AI chips. This, in turn, requires caution before positioning for any meaningful upward movement of the NZD/USD pair.