NZD/USD gains strength above 0.5800 as New Zealand emerges from recession

NZD/USD was trading around 0.5820 in early Asian trading on Thursday. The New Zealand dollar (NZD) found support as fourth-quarter 2024 growth data came in stronger than expected. However, as the Federal Reserve (Fed) kept interest rates unchanged at the meeting, this could limit the upside for the pair, thereby supporting the US dollar.

Data released by Statistics New Zealand on Thursday showed that New Zealand's gross domestic product (GDP) grew 0.7% quarter-on-quarter in the fourth quarter, compared with -1.1% in the previous period (revised from -1.0%). This figure was higher than the market consensus of 0.4%. GDP contracted at an annualized rate of 1.1% in the fourth quarter, following a 0.3% drop in the third quarter and better than expectations for a 1.4% decline. Kiwibank chief economist Jarrod Kerr said New Zealand was slowly emerging from recession. The New Zealand dollar strengthened slightly in an immediate reaction to the upbeat GDP data.

The Federal Reserve kept the federal funds rate in a range of 4.25% to 4.5% at its March meeting on Wednesday, as widely expected. Still, the U.S. central bank maintained its outlook for two rate cuts for the rest of the year, citing uncertainty caused by U.S. President Donald Trump's tariff policies.

At the press conference, Federal Reserve Chairman Jerome Powell noted that "labor market conditions are favorable and inflation has been close to our 2% longer-run objective, although it remains slightly elevated." Hawkish comments from Fed officials are likely to support the dollar and create resistance for NZD/USD in the short term.