The New Zealand dollar recently hit a six-month low against the U.S. dollar, sliding to 0.5731. The intraday decline was triggered by the Reserve Bank of New Zealand's (RBNZ) October monetary policy decision to cut the official cash rate by 50 basis points — a much more aggressive move than the widely anticipated 25-basis-point cut. So the actual result surprised market participants. Moreover, the central bank has made it clear that it is open to further steps to ease monetary policy. This "ultra-dovish" move took the market by surprise and reminded traders that the RBNZ is not afraid to act boldly when needed.
The Reserve Bank of New Zealand really does know how to surprise the market—though this particular quality isn't necessarily a positive trait for a central bank. Poor communication often leads to heightened volatility, unsettling markets. Even so, facts are facts. For example, six years ago — in the summer of 2019 — the RBNZ shocked the markets by unexpectedly cutting interest rates by 50 basis points without any prior signal. At the time, the global financial system was feeling the weight of the U.S.–China trade war, and the Reserve Bank of New Zealand became the first among major global central banks to initiate monetary easing — a move later followed by the Federal Reserve, European Central Bank, Reserve Bank of Australia, and several others.
In 2024, a mirror scenario occurred — the RBNZ again became one of the first central banks to begin easing monetary policy. With the latest cut included, the central bank has lowered interest rates by a total of 300 basis points since August of the previous year.
Notably, ahead of the previous (August) meeting, there were widespread market rumors that the RBNZ would conclude its current rate-cutting cycle since inflation had accelerated in the second quarter. Those expectations failed to materialize: the central bank not only cut rates by 25 basis points, but also clearly hinted at another reduction at one of the upcoming meetings. As a result, the scenario of a 25-point cut in October was fully priced in and reflected in market action.
But, as already mentioned, the RBNZ has a reputation for surprises. Although key macroeconomic data for the third quarter (inflation, labor market, GDP) had yet to be published, the central bank decided to "move ahead of the curve" by cutting rates by a full 50 basis points. The reasons cited included slowing economic growth (weak domestic demand and lingering effects from the previous tightening cycle), weakening domestic inflationary pressures (moderate wage growth, restrained inflation expectations, and price increases mostly driven by external shocks rather than internal overheating). The central bank also pointed to a decline in business investment, with the construction sector — one of the key GDP drivers — being especially affected. Additionally, there is weakening global demand, particularly from China, a major trading partner of New Zealand (notably via dairy, meat, and other exports).
By cutting the rate by 50 basis points, the RBNZ all but confirmed that another rate cut could come before the end of the year — likely at the December meeting.
Interestingly, despite the clear dovish outcome of the October RBNZ meeting, the New Zealand dollar managed to partly recover against the U.S. dollar. The NZD/USD pair initially dropped sharply to 0.5731 but ended the day at 0.5780. On Thursday, buyers of the pair have already tested the 0.58 range. While they failed to hold above the 0.5800 resistance level, sellers of NZD/USD have yet to regain control.
This suggests that, given the ongoing U.S. government shutdown, traders are hesitant to open large positions in favor of the U.S. dollar. On Wednesday, for the sixth time, the U.S. Senate failed to pass a government funding bill — even though the shutdown has already led to mass flight disruptions across the country. Despite such obvious negative consequences, Republicans and Democrats continue to defend their positions, refusing to compromise.
Moreover, according to Reuters, Trump has proposed withholding back pay for federal employees accrued during the shutdown. The situation is clearly deteriorating, with no resolution in sight, which is keeping the U.S. dollar under persistent pressure and allowing NZD/USD buyers to "hold the line."
From a technical perspective, the NZD/USD pair is currently trading between the middle and lower lines of the Bollinger Bands on both the four-hour and daily charts. On the D1 timeframe, it is below the Kumo cloud and the Kijun-sen line, but above the Tenkan-sen line. On the H4 chart, it is between the Kijun-sen and Tenkan-sen lines. Long positions should only be considered if the pair breaks above the resistance level at 0.5810 — the upper boundary of the Kumo cloud on the H4 chart): in this case, the pair will be between the middle and upper Bollinger Bands lines on the H4 chart, as well as above all Ichimoku indicator lines, which will form a bullish "Parade of Lines" signal.
