New Zealand Dollar (NZD) Recovery Against US Dollar (USD)
- NZD/USD stages a modest recovery from over a one-week low amid subdued USD demand.
- The Fed’s hawkish pause and rebounding US bond yields act as a tailwind for the Greenback.
- Trade war fears might contribute to capping the pair ahead of the US PCE Price Index data.
The NZD/USD pair attracts some buyers during the Asian session on Friday and for now, seems to have snapped a three-day losing streak to over a one-week low, around the 0.5620 area touched the previous day. Spot prices currently trade around the 0.5640-0.5645 region, though the upside seems limited.
Factors Influencing NZD/USD Pair
- A positive tone around equity markets caps the USD recovery from over a one-month low.
- The Federal Reserve’s hawkish pause contrasts with bets for aggressive policy easing by the RBNZ.
- Trade war fears and Trump’s protectionist policies contribute to market volatility.
- Rebounding US Treasury bond yields support the USD’s recovery gains.
The Fed’s recent stance and the bounce in US bond yields have created a divergence in market expectations between the US and New Zealand, leading to caution in trading the NZD/USD pair. Additionally, ongoing trade tensions and the upcoming US PCE Price Index data could impact the pair’s movement in the near term.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is influenced by various factors:
Chinese Economy
- China’s economic performance impacts NZD due to being New Zealand’s biggest trading partner.
- Weak Chinese economy can lead to reduced exports from New Zealand, affecting NZD.
RBNZ Policy
- RBNZ aims to maintain inflation between 1-3%, affecting interest rates and NZD value.
- Rate differentials between New Zealand and the US influence the NZD/USD pair.
Macroeconomic Data
- Strong economic data in New Zealand boosts NZD, while weak data can lead to depreciation.
Risk-On Sentiment
- NZD strengthens during low-risk periods and weakens during market turbulence.
US-China Trade War FAQs
The US-China trade war and its implications:
Trade War Definition
- Trade war involves economic conflicts with trade barriers and tariffs between countries.
History and Impact
- Trade tensions between US and China began in 2018, affecting global economic stability.
- Phase One trade deal in 2020 aimed to address issues but tensions remain.
Current Situation
- Return of Trump to office sparked fresh tensions and potential escalation in the trade war.
- Resumed trade war could disrupt global supply chains and impact inflation and investment.