The State of NZD/USD in the Early Asian Session
- NZD/USD weakens to around 0.6055 in Friday’s early Asian session.
- The stronger US economic data on Thursday supports the Greenback.
- Investors will monitor the Chinese GDP, Retail Sales, and Industrial Production data, which are due on Friday.
The NZD/USD pair is currently on the defensive near 0.6055 during the early Asian session on Friday. The recent rise in expectations for a smaller 25 basis points (bps) Federal Reserve (Fed) rate cut in November, coupled with stronger US economic data, is bolstering the Greenback and putting pressure on the pair. Investors are eagerly awaiting the release of Chinese economic data, including Gross Domestic Product (GDP), Retail Sales, and Industrial Production figures, for fresh market insights.
Factors Influencing the NZD/USD Pair
- The US September Retail Sales exceeded expectations, with August figures also being revised upwards.
- Weekly Initial Jobless Claims saw an unexpected decline, signaling a strong US economy.
- Traders are now betting on gradual rate cuts by the Fed in upcoming meetings, boosting the US Dollar against the Kiwi.
According to Ellen Zentner at Morgan Stanley Wealth Management, “Strong data will prompt some resistance from Fed members to a rate cut in November. However, Chair Jerome Powell is likely to continue with steady, quarter-point moves.”
On the other hand, recent data from New Zealand showed a decrease in inflation to 2.2% YoY in the third quarter (Q3) from 3.3% previously. This figure now falls within the central bank’s target band of 1% to 3% for the first time since early 2021. As a result, the Reserve Bank of New Zealand is expected to lower interest rates in the coming months, leading to a decline in the NZD.
Impact of Chinese Economic Data
The upcoming release of Chinese economic data will provide insights into the growth pace of China, a significant trading partner for New Zealand. Any signs of economic weakness in China could put selling pressure on the Kiwi in the near term.
New Zealand Dollar FAQs
Understanding the New Zealand Dollar (NZD)
The New Zealand Dollar, also known as the Kiwi, is a widely traded currency influenced by various factors:
- The health of the New Zealand economy and central bank policy play a crucial role in determining the NZD’s value.
- The performance of the Chinese economy, as New Zealand’s largest trading partner, impacts the Kiwi significantly.
- Dairy prices, given the dairy industry’s prominence in New Zealand’s exports, also influence the NZD.
Factors Affecting the NZD Valuation
The Reserve Bank of New Zealand (RBNZ) aims to maintain inflation between 1% and 3%, affecting interest rates and the NZD:
- Higher interest rates to combat high inflation strengthen the NZD.
- A rate differential compared to the US Federal Reserve’s rates can impact the NZD/USD pair.
Impact of Macroeconomic Data on NZD
New Zealand’s economic data releases are vital indicators of the NZD’s valuation:
- A strong economy with high growth and low unemployment benefits the NZD.
- Weaker economic data can lead to a depreciation of the NZD.
Market Sentiment and NZD
The NZD tends to react to market sentiment:
- During risk-on periods, the NZD strengthens as investors are optimistic about growth.
- In times of market turbulence, the NZD weakens as investors seek safe-haven assets.