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• New Zealand Dollar (NZD) remains on the defensive on Thursday after the latest NZ government budget announcement.
• New Zealand forecasts inflation falling to below 3% in Q3 2024, to 2% around 2026. 
• Investors will keep an eye out for key US data to cap off the trading week.

The NZD/USD pair edges lower around  0.6105 during the Asian session on Thursday. The release of the New Zealand budget outline for the 2024 fiscal year had little to no impact on the Kiwi as the pair remains influenced by the USD dynamic. New Zealand Finance Minister Nicola Willis stated that the Treasury sees inflation falling to below 3% in Q3 2024 and easing to 2% around 2026. The New Zealand treasury sees NZ GDP contracting in H1 2024, and growth in H2 2024.

Furthermore, New Zealand forecast a budget deficit of NZ$11.07 for the fiscal year ending June 30, 2024, wider than a deficit of NZ$9.32 billion estimated in December. The government expects a return to an obegal surplus in 2027/28.

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
 

NZD/USD
 

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