- NZD/USD climbs to around 0.5580 in Tuesday’s Asian session.
- Traders move to price in five Fed rate cuts by year-end.
- China’s central bank said it will provide lending support to sovereign funds to stabilize the market.
The NZD/USD pair attracts some buyers to around 0.5580 during the Asian trading hours on Tuesday. US President Donald Trump's tariffs on trade partners have raised fears of the potential recession in the United States, weighing on the Greenback. The Reserve Bank of New Zealand (RBNZ) interest rate decision will take center stage on Wednesday.
Traders are now pricing in five 25 basis points (bps) rate cuts from the Federal Reserve (Fed) by year-end as rising fears of a recession in the US are exacerbating the pricing in the past week. According to the CME FedWatch tool, derivatives markets now imply a 44% possibility that the Fed will cut rates at its next meeting on May 6-7, up from 14% a week ago. The rising expectation of more Fed rate reductions this year drags the US Dollar (USD) lower and acts as a tailwind for NZD/USD.
On the other hand, China’s stimulus plans could underpin the China-proxy Kiwi, as China is a major trading partner of New Zealand. The People’s Bank of China (PBoC) said early Tuesday that it will provide support to a sovereign fund when needed as it firmly supports its decision to buy more stocks. In a statement, China's central bank said that it will step up funding aid via a re-lending program to Central Huijin Investment Ltd. when it’s necessary, as needed, to ensure capital market stability.
All eyes will be on the RBNZ interest rate decision on Wednesday, which is expected to cut its Official Cash Rate (OCR) by 25 bps to 3.5%. The move comes amid easing inflation, slowing economic growth, and emerging signs of labor market weakness. Nearly 90% of the economists from the Reuters poll expect another 25 bps cut in May. The median forecast indicated a further 25 bps reduction in the third quarter, which would bring the OCR to 3.00% by the end of September.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
BRANDED CONTENT
Finding a broker with low spreads can make a big difference in your trading success. Discover our top picks for low-spread brokers, each offering unique benefits to fit your strategy.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: Bulls need to clear the 200-day SMA
AUD/USD treaded water around 0.6360 after once again faltering near recent tops in the 0.6440 zone, always on the back of the intense recovery in the US Dollar. In the meantime, positive headlines on the US-China trade front could help the Aussie stay in the upper end of the range for the time being.
EUR/USD: Minor support lies around 1.1300
EUR/USD remained on the back footing as the Greenback intensified its recovery in response to alleviated concerns over the Fed’s independence and encouraging news surrounding the US-China trade conflict.
Gold corrected extreme conditions, struggles around $3,300
Gold extended its decline on Wednesday, slipping below the $3,300 mark per troy ounce in response to reports from the media suggesting the Trump administration is weighing tariff reductions on Chinese goods, a news that revived hopes of easing trade tensions and reduced demand for the yellow metal as a safe-haven asset.
TRUMP meme coin rallies following announcement of President Trump's upcoming dinner with top 220 holders
Official TRUMP rallied 50% on Wednesday after the team behind the meme coin announced plans for its top 220 token holders to have a dinner with President Donald Trump in May. The announcement also included an extension of the token's initial unlock plan by an additional 90 days.
Five fundamentals for the week: Traders confront the trade war, important surveys, key Fed speech Premium
Will the US strike a trade deal with Japan? That would be positive progress. However, recent developments are not that positive, and there's only one certainty: headlines will dominate markets. Fresh US economic data is also of interest.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.