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

• NZD/USD loses ground around 0.6200 in Thursday’s early Asian session. 
• New Zealand’s GDP fell 0.2% in Q2 vs. 0.1% growth prior, better than expected. 
• The US Fed cut its interest rate by 50 bps to 4.75%-5.0% on Wednesday, as widely expected. 

The NZD/USD pair edges lower to near 0.6200 during the early Asian session on Thursday. The recent GDP data revealed that New Zealand's economy shrank again in the second quarter, suggesting the depths of its economic malaise. Later on Thursday, the US weekly Initial Jobless Claims, the 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 0.2% QoQ in the second quarter (Q2) compared with the 0.1% growth in Q1. This reading came in above expectations of a 0.4% contraction. Meanwhile, the annual second-quarter GDP came in at -0.5%, compared with the 0.5% growth in Q1, in line with the estimations. 

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

On the USD’s front, the US Fed slashed its benchmark interest rate by 50 bps to 4.75%-5.0% for the first time in four years, as widely expected. Fed officials shift their focus to supporting a weakening job market and achieving a rare “soft landing," which curbs inflation without causing a sharp recession. 

During the press conference, Fed Chair Jerome Powell said the half-point rate reduction did not represent any new pattern for the central bank but that policymakers want to keep the economy and the labor market in good shape.