The New Zealand Dollar (NZD) weakened against the US Dollar (USD) on Tuesday, with the NZD/USD pair edging lower to around 0.5960 during the Asian session. The decline comes after New Zealand’s latest inflation report showed softer-than-expected price pressures, increasing the likelihood of further rate cuts by the Reserve Bank of New Zealand (RBNZ).
According to Statistics New Zealand, Consumer Price Index (CPI) inflation rose 2.7% year-on-year in Q2 2025, slightly below the market expectation of 2.8% and up modestly from the 2.5% print in Q1. On a quarterly basis, inflation eased to 0.5%, down from 0.9% in the previous quarter and below the consensus forecast of 0.6%.
The cooler-than-expected inflation data has reinforced expectations that the RBNZ will take a more dovish stance in the coming months. Markets are now pricing in an 85% probability of a 25 basis point rate cut at the central bank’s August meeting, as policymakers aim to support growth and bring inflation back within their target band.
US Political Tensions Limit NZD/USD Decline
While downside pressure dominates the NZD/USD pair, ongoing political uncertainty in the United States may limit further losses. Concerns about the independence of the US Federal Reserve remain in focus after The Wall Street Journal reported that Treasury Secretary Scott Bessent had persuaded President Trump not to fire Fed Chair Jerome Powell—a claim Trump publicly denied on Sunday.
This backdrop of Fed-related tensions continues to weigh on overall USD sentiment, capping further downside in the NZD/USD pair despite the soft New Zealand inflation figures.
Outlook
With New Zealand’s inflation data pointing to a more accommodative RBNZ and US political uncertainty adding volatility, NZD/USD may remain pressured in the near term. A sustained move below the 0.5950 support zone could open the door to further declines, especially if the US Dollar regains broader strength. Conversely, any dovish rhetoric from the Fed or positive risk sentiment could help the Kiwi stabilize.
