The quarterly NZIER report showed a significant rise in business confidence at the end of 2025. The report indicated that 39% of surveyed companies expect overall economic conditions to improve in the coming months (in the previous report, only 17% of companies expected this), company activity has noticeably increased, and there are signs of capacity reserve reductions in a number of sectors.

There are other positive signals — strong growth in manufacturing-sector expectations, rising domestic demand, and improved sentiment in the construction sector.

As for price dynamics, the report does not allow a clear conclusion whether prices are rising or slowing. Apparently, the key factor influencing the kiwi's further course will be the Q4 inflation report on January 22. After inflation fell to 2.2% in Q3 2024 and remained there for some time, it resumed growth in 2025, reaching 3% year-on-year in Q3. If price growth continued, the confident state of New Zealand's economy — the conclusion to draw from the NZIER quarterly report — would allow the RBNZ to start raising the rate earlier than the current 2.25%. The market now sees the start of a tightening cycle in H2 2026, with three hikes by May 2027; if the Q4 inflation report shows a result above 3.0%, the RBNZ may start this cycle earlier, which would undoubtedly be a strong bullish driver for the kiwi over the long run.

At the same time, the US inflation report for December gave the dollar no grounds for further strengthening. The core index rose 0.2% month-on-month (seasonally adjusted) and 2.6% year-on-year, both figures 0.1% below expectations. Headline inflation matched forecasts, and it would seem the Fed can continue to pause, but given the intense pressure on the Fed from Trump, there is no longer firm confidence that this pause can be extended to June as markets currently expect.

For now, we will proceed on the assumption that no new reasons for the dollar's strengthening have emerged, while reasons for its weakening are becoming increasingly evident. The market has not yet reacted to the increased pressure from Trump on the Fed, and it continues to maintain its rate outlook, but who knows — this perception could change in an instant. Trump already commented today after the inflation report, calling the inflation figures excellent (low) and saying Powell should substantially cut interest rates.

Despite the significant improvement in sentiment, speculative investors are still reluctant to exit their negative stance on the kiwi; the net short position did not change over the reporting week and remains at -2.5 billion, which is quite large for a small economy. The estimated price has held above the long-term average since mid-November, but attempts to move below it are now visible.

The NZD/USD pair has entered a sideways range. In the previous review, we suggested that if the NZIER report shows sustained GDP growth and US data (ISM and especially the labor market) are seen as weak, NZD/USD will begin to form a new bullish impulse. In fact, most of those conditions have been met: NZIER is very strong in Q4, the US labor market report is unconvincing, and only ISM still shows no slowdown. The kiwi held above support at 0.5731; the probability of a new bullish trend exists, and if the move begins, the first meaningful target will be 0.5910. There are fewer grounds for further kiwi weakness than for growth.