Commodities heavily influence both the New Zealand and Canadian dollars, as both nations are significant exporters. The NZD tends to react more to moves in agricultural products, particularly dairy, meat, and wood, given New Zealand’s strong reliance on these exports. The CAD remains closely tied to oil and natural gas price fluctuations, reflecting Canada’s abundant energy resources.
Beyond commodities, the currencies are driven by their respective economic ties: Canada is closely linked to trends in the U.S., its largest trading partner, with substantial integration in industries like automotive manufacturing. New Zealand is more sensitive to developments in Asia-Pacific economies, especially China and Australia, which are its major trading partners. In the absence of fresh geopolitical shocks, traders are focusing on central bank policy divergence and incoming economic data.
On that front, the Bank of Canada recently paused its rate-cutting cycle at its meeting on June 4, 2025, holding its policy rate at 2.75%. This followed a series of cuts that began in June 2024. Markets widely expected this hold, as the BoC remains in a wait-and-see mode, particularly given ongoing uncertainty regarding U.S. tariff changes and their potential economic impact.
Meanwhile, the Reserve Bank of New Zealand (RBNZ) commenced its own cutting cycle in April 2025 with a 25 basis point cut, bringing the Official Cash Rate (OCR) to 3.50%, and followed up with another 25 basis point cut in May 2025, bringing the OCR to 3.25%. The RBNZ has signaled that more cuts may follow, citing a lower inflation outlook and global trade risks.