NZD/USD drifts into the low side ahead of NZ 2024 budget release

• New Zealand prepares for the latest NZ government budget announcement.
• NZ’s Fiscal Strategy Report will release alongside NZ’s updated budget.
• Investors will keep an eye out for key US data to cap off the trading week.

NZD/USD is on the soft side as markets pivot to Thursday’s early Pacific trading session, with the pair drifting into the 0.6100 region as the New Zealand government prepares to release its budget outline for the 2024 fiscal year alongside an updated Fiscal Strategy Report. New Zealand’s budget outline for 2024 will be announced by Minister of Finance Hon. Nicola Willis around 02:00 GMT.

According to analysts from Goldman Sachs, the NZD has been bolstered by a recent rise in dairy prices, but things could turn sour for the Kiwi if traders poke holes in the NZ government budget for 2024. Thursday’s joint budget and Financial Strategy Report follow up on the Budget Policy Statement for 2024 released in March.

Looking ahead, Reserve Bank of New Zealand (RBNZ) Governor Orr will appear early Friday, and broader markets will pivot to face key US Gross Domestic Product (GDP) growth figures and US Personal Consumption Expenditures (PCE) Price Index inflation.

US Annualized Q1 GDP, slated for Thursday, is forecast to ease to 1.3% versus the previous print of 1.6%, and Core PCE Price Index inflation on Friday is expected to hold steady at 0.3% MoM in April. With investors desperate for signs of future rate cuts from the Federal Reserve (Fed), investors will be looking for signs of further easing in the US economy and cooling inflation figures. 

According to the CME’s FedWatch Tool, rate markets are pricing in slightly-worse-than-even odds of at least a quarter-point Fed rate trim in September, down sharply from the 70% odds that were priced in a week and a half ago. With the US economy still outperforming expectations, a still-tight labor market, and inflation still running hotter for longer than expected, rate-cut-hungry investors are hoping for signs of economic underperformance to bolster chances of at least two rate cuts in 2024 from the Fed.

NZD/USD technical outlook

NZD/USD is trading down in the early Thursday market session, drifting towards the 0.6100 handle as broad-market Greeback strength forces down the Kiwi. The pair is heading lower for a third consecutive trading day, and bearish momentum will drag NZD/USD into the 200-day Exponential Moving Average (EMA) at 0.6077.

Despite near-term bearishness, the pair is still trading up from the last swing low into 0.5850 in April, and it’s buyers’ game to lose with the pair making little progress on the high side of key technical levels.

NZD/USD hourly chart

NZD/USD daily chart