- NZD/USD drops to around 0.5610 in the early Asian session on Thursday.
- Fed officials said they will slow the pace of rate cuts because of uncertainty, minutes from Wednesday’s meeting showed.
- China’s December CPI inflation data will be released on Thursday.
The NZD/USD pair is trading with slight losses around 0.5610 during the early Asian session on Thursday. Expectation of a slower rate cut by the Federal Reserve (Fed) continues to support the US Dollar (USD) overall.
Minutes released Wednesday showed that Fed policymakers expressed concerns about inflation and the impact President-elect Donald Trump’s policies could have. Fed officials indicated they would move more slowly on rate cuts because of the uncertainty.
Fed officials reduced the planned cuts in 2025 to two from four in the previous estimate at the September meeting. A tougher stance from the US central bank and the signal that it would slow the pace of rate cuts in 2025 provide some support to the Dollar and act as a headwind for NZD/USD.
Investors await China’s December Consumer Price Index (CPI) inflation data, due out later on Thursday. Several Fed officials are scheduled to speak later in the day. On Friday, US nonfarm payrolls (NFP) for December will be in focus.
On Tuesday, the National Development and Reform Commission (NDRC), China’s top economic planner, issued a guideline to build a unified national market, removing market barriers to boost domestic demand while improving opening-up. New support measures from China could boost the Kiwi as China is a major trading partner for New Zealand.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known currency among investors. Its value is largely determined by the health of the New Zealand economy and the policy of the country’s central bank. However, there are some peculiarities that can also cause the NZD to move. The evolution of the Chinese economy tends to move the Kiwi because China is New Zealand’s largest trading partner. The bad news for the Chinese economy will likely mean fewer New Zealand exports to the country, which will affect the economy and therefore its currency. Another factor moving the NZD is dairy product prices, as the dairy industry is New Zealand’s main export. High dairy prices boost export earnings, contributing positively to the economy and therefore the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate of between 1% and 3% over the medium term, with the aim of keeping it close to the midpoint of 2%. To do this, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ raises interest rates to cool the economy, but the move will also drive up bond yields, making investors more attractive to invest in the country and thus boosting the NZD. On the contrary, lower interest rates tend to weaken the NZD. The so-called rate differential, or what rates in New Zealand are or are expected to be compared to those set by the US Federal Reserve, can also play a key role in the movement of the NZD/USD pair.
The release of macroeconomic data in New Zealand is key to assessing the state of the economy and can influence the valuation of the New Zealand Dollar (NZD). A strong economy, based on high economic growth, low unemployment and high confidence is good for the NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to raise interest rates if this economic strength is accompanied by high inflation. Conversely, if economic data is weak, the NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during periods of risk appetite, or when investors perceive overall market risks to be low and are optimistic about growth. This usually translates into a more favorable outlook for commodities and so-called “commodity currencies” such as the kiwi. Conversely, the NZD tends to weaken during times of market turmoil or economic uncertainty, as investors tend to sell riskier assets and flee to more stable havens.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
