NZD/USD trades near 0.5650 after recouping some losses, US GDP Annualized awaited

• NZD/USD reached to 27-month low at 0.5607 after the release of Gross Domestic Product data for the third quarter.
• New Zealand's GDP shrank by 1.0% QoQ in Q3, against the expected 0.4% contraction.
• Fed's Summary of Economic Projections suggested only two rate cuts in 2025, down from four cuts projected in September.

NZD/USD extends its losing streak for the third successive session following weaker-than-expected New Zealand's Gross Domestic Product (GDP) data for the third quarter. The Kiwi pair declined to 0.5607, the lowest level not seen since October 2022, currently trading around 0.5640 during the European hours on Thursday.

New Zealand's GDP contracted by 1.0% quarter-over-quarter in Q3, slightly improving from the revised 1.1% contraction in Q2 but worse than the anticipated 0.4% decline. On an annual basis, GDP shrank by 1.5% in Q3, a sharper decline compared to the previous 0.5% contraction and well below the expected 0.4% drop. This disappointing data places New Zealand in its deepest recession since the initial COVID-19 slump in 2020.

The New Zealand Dollar faces additional pressure from renewed concerns over China's economy, a critical trading partner. Weak Chinese economic data, including Retail Sales missing expectations in November, has heightened challenges for policymakers. This comes despite President Xi Jinping's recent call to boost household consumption.

The NZD/USD pair dropped over 1.5% in the previous session as the US Dollar (USD) strengthened following the Federal Reserve's (Fed) hawkish 25 basis point (bps) rate cut at its December meeting, bringing the benchmark lending rate to a range of 4.25%-4.50%, marking a two-year low. The Summary of Economic Projections, or 'dot-plot,' suggested only two rate cuts in 2025, down from four cuts projected in September.

Additionally, Fed Chair Jerome Powell made clear on Wednesday that the Fed will be cautious about further cuts as inflation remains stubbornly above the central bank's 2% target. Traders are highly expected to focus on upcoming US economic data, including weekly Initial Jobless Claims, Existing Home Sales, and the final Q3 Gross Domestic Product (GDP) Annualized reading, scheduled for release on Thursday.