The Current State of NZD/USD Pair
- NZD/USD struggles to gain traction amid mixed fundamental cues.
- Fed signals more rate cuts and positive risk tone undermine the USD.
- China’s economic woes cap antipodean currencies, including the Kiwi.
The NZD/USD pair is experiencing fluctuations during the Asian session on Friday, trading around the 0.6235-0.6240 region. This range is close to the monthly peak reached the previous day.
Factors Influencing NZD/USD Pair
The US Dollar (USD) is facing challenges in attracting buyers and is near the year-to-date low amid expectations of more interest rate cuts by the Federal Reserve (Fed). This outlook is supporting the NZD/USD pair. The Fed anticipates a further 50 basis points decrease in borrowing costs by the end of the year, with benchmark rates projected to decline to 3.4% in 2025, down from the previous forecast of 4.1%, before reaching 2.9% in 2026.
Additionally, the global equity markets’ risk-on sentiment is weakening demand for the safe-haven Greenback, benefiting the risk-sensitive Kiwi. However, concerns about an economic slowdown in China are hindering antipodean currencies, including the NZD. Despite this, hopes for additional stimulus are expected to provide support for the NZD/USD pair and prevent significant declines.
China’s Economic Measures
The National Development and Reform Commission of China recently announced plans for incremental measures to support economic and social development goals. Although this announcement did not have a significant impact on the NZD/USD pair, caution is advised regarding continued bullish trends.
Upcoming Influences on NZD/USD Pair
No major economic data releases are scheduled from the US on Friday. However, a speech by Philadelphia Fed President Patrick Harker could influence USD price dynamics. Overall market sentiment will also play a role in short-term trading opportunities for the NZD/USD pair.
New Zealand Dollar FAQs
Factors Affecting NZD Value
The New Zealand Dollar (NZD), also known as the Kiwi, is influenced by various factors:
- The health of the New Zealand economy and central bank policies.
- Performance of the Chinese economy as New Zealand’s largest trading partner.
- Dairy prices, impacting export income and economic growth in New Zealand.
RBNZ Policy and Interest Rates
The Reserve Bank of New Zealand (RBNZ) aims to maintain inflation between 1% and 3%. Interest rate adjustments by the RBNZ affect NZD value, with higher rates strengthening the currency.
Macroeconomic Data and NZD
Economic indicators in New Zealand, such as growth, unemployment, and inflation, impact the NZD valuation. Strong economic data supports a stronger NZD.
Risk-On Periods and NZD
The NZD tends to strengthen during low-risk periods, while market turbulence weakens the currency as investors seek safe-haven assets.