- The NZD/USD is strengthened to around 0.6055 in the early Asian session on Thursday.
- USA and China will discuss the extension of the tariff term next week.
- Traders prepare for preliminary reading of US PMI data for July later on Thursday.
The NZD/USD torque is traded in positive territory about 0.6055 during the Early Asian Session on Thursday, driven by an improvement in the risk appetite. Traders will be attentive to the prospects for trade agreements between the US and China that could improve global economic perspectives.
The president of the USA, Donald Trump, announced a commercial agreement on Tuesday with Japan, which reduces tariffs on 15% car imports in exchange for an investment package and loans of 550,000 million dollars to the US, according to Reuters. These positive developments raise the riskiest currency, such as the New Zealand dollar (NZD) against the US dollar (USD).
However, uncertainty about Trump’s tariffs keeps the market in suspense. The US Treasury Secretary, Scott Besent, declared that he will meet with Chinese officials in Stockholm next week to discuss an extension of the deadline to negotiate a commercial agreement.
Tariffs could return to 145% of the US side and 125% of the Chinese side without a commercial agreement or an extension of the negotiation. Any sign of renewed commercial tensions could exert some sale pressure on the Kiwi, which acts as a Chinese proxy, since China is an important commercial partner of New Zealand.
In addition, the growing expectations of a rate cut by the New Zealand Bank Reserve (RBNZ) could contribute to the decline of the NZD. The data published on Monday showed that New Zealand annual inflation reached a maximum of one year in the second quarter (Q2) but was below the market consensus. Markets have discounted a possibility of 80% of a 25 basic points cut (PBS) in August, although investors believe that the flexibility cycle could be close to its end.
Later on Thursday, the preliminary reading of the US Purchase Management Index (PMI) for July will be at the Care Center. In addition, the initial applications of US unemployment subsidy, the sales of new homes and the National Activity Index of the Chicago Fed. If the reports show weaker results than expected, this could weigh on the US dollar and act as a tail wind for the torque.
New Zealand dollar – Frequently Questions
The New Zealand dollar (NZD), also known as Kiwi, is a well -known currency among investors. Its value is largely determined by the health of the neozyous economy and the policy of the country’s central bank. However, there are some peculiarities that can also make the NZD move. The evolution of the Chinese economy tends to move Kiwi because China is the largest commercial partner in New Zealand. The bad news for the Chinese economy is probably translated into less neozyous exports to the country, which will affect the economy and, therefore, its currency. Another factor that moves the NZD is the prices of dairy products, since the dairy industry is the main export of New Zealand. The high prices of dairy products boost export income, contributing positively to the economy and, therefore, to the NZD.
The New Zealand Reserve Bank (RBNZ) aspires to reach and maintain an inflation rate between 1% and 3% in the medium term, with the aim of keeping it near the midpoint of 2%. To do this, the Bank sets an adequate level of interest rates. When inflation is too high, RBNZ rises interest rates to cool the economy, but the measure will also raise bond performance, increasing the attractiveness of investors to invest in the country and thus boosting the NZD. On the contrary, lower interest rates tend to weaken the NZD. The differential type of types, or how they are or is expected to be the types in New Zealand compared to those set by the Federal Reserve of the US, can also play a key role in the NZD/USD movement.
The publication of macroeconomic data in New Zealand is key to evaluating the status 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 NZD. High economic growth attracts foreign investment and can encourage the New Zealand reserve bank to increase interest rates, if this economic strength is accompanied by high inflation. On the contrary, if the economic data is weak, the NZD is likely to depreciate.
The New Zealand dollar (NZD) tends to strengthen during periods of appetite for risk, or when investors perceive that the general market risks are low and are optimistic about growth. This usually translates into more favorable perspectives for raw materials and the so -called “raw material currencies”, such as Kiwi. On the contrary, the NZD tends to weaken in times of turbulence in markets or economic uncertainty, since investors tend to sell the most risky assets and flee the most stable shelters.
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.
