07:14 AM EDT, 09/18/2025 (MT Newswires) -- The biggest movers amongst G10 currencies overnight Wednesday were the Australian (AUD) and New Zealand (NZD) dollars, said MUFG.

The main trigger has been the release of the weaker economic activity and labor market data from the region, wrote the bank in a note to clients. The New Zealand dollar has declined sharply by just over 1% against the US dollar (USD), resulting in NZD/USD falling back below the 0.5900 level.

The sell-off for the NZD was driven by the release of the latest gross domestic product report from New Zealand, revealing the economy contracted more sharply than expected by 0.9% in Q2 following the 0.9% expansion in Q1, stated MUFG. The Reserve Bank of New Zealand (RBNZ) had been forecasting a contraction of 0.3% for Q2.

Weakness in business investment and exports more than offset a modest increase in household spending. The report has encouraged expectations that the RBNZ will continue to lower rates in October and November, pointed out the bank. There are currently just over 50bps of easing priced in by year-end.

The RBNZ was already concerned by the ongoing weakening in the labor market, where the unemployment rate rose to a new cyclical high of 5.2% in Q2.

The New Zealand dollar has clearly underperformed so far in Q3, when it has been the worst-performing G10 currency, added MUFG. The performance of the NZD and AUD has diverged.

Over the same period, the AUD has been one of the top three performing currencies. AUD/USD recently broke above resistance at the 0.6600 level, although it suffered a setback overnight. Employment unexpectedly contracted in Australia by 5,400 in August, reinforcing expectations for the Reserve Bank of Australia, to lower rates further in November.according to MUFG.