NZD/USD eases near 0.6200 as New Zealand GDP shrinks 0.2% in Q2

• NZD/USD is losing ground around 0.6200 in the first Asian session on Thursday.
• New Zealand’s GDP fell 0.2% in Q2 from a 0.1% increase previously, better than expected.
• The US Fed cut its interest rate by 50 bps to 4.75%-5.0% on Wednesday, as expected.

NZD/USD dips to near 0.6200 during the early Asian session on Thursday. Recent GDP data showed New Zealand’s economy contracted again in the second quarter, suggesting the depth of the economic malaise. Later on Thursday, the weekly US Initial Joboming Claims, Philly Fed Manufacturing Index and Existing Home Sales will be released.

Data released by Statistics New Zealand showed on Thursday that the country’s Gross Domestic Product (GDP) contracted by 0.2% QoQ in the second quarter (Q2), compared with growth of 0.1% in Q1. That reading came in above expectations for a 0.4 percent contraction. Meanwhile, second-quarter annual GDP came in at -0.5%, compared with 0.5% growth in Q1, in line with estimates.

The stronger-than-expected GDP number failed to boost the Kiwis as traders continue to weigh in on the Federal Reserve’s (Fed) jumbo interest rate cut in a fairly volatile session on Wednesday. Financial markets are now betting more than 50% on a 50bp cut by the Reserve Bank of New Zealand (RBNZ) as soon as October.

On the USD front, the US Fed cut its benchmark interest rate by 50bps to 4.75%-5.0% for the first time in four years, as expected. Fed officials are shifting their focus to supporting a weakening labor market and achieving a rare “soft landing,” which reduces inflation without causing a sharp recession.

During the news conference, Fed Chairman Jerome Powell said that the half-point interest rate cut is not a new model for the central bank, but that policymakers want to keep the economy and labor market in good shape.