- NZD/USD softens to around 0.5635 in Wednesday’s early Asian session.
- The stronger US data suggested the Fed is likely to slow the easing cycle.
- Investors will monitor how aggressive Trump's tariff plans could be when he takes office.
The NZD/USD pair trades with mild losses near 0.5635 during the early Asian session on Wednesday. The upbeat US Services Purchasing Managers Index (PMI) for December suggested that the Federal Reserve (Fed) will likely slow the pace of its easing cycle, supporting the US Dollar (USD). Later on Wednesday, the Minutes of the Federal Open Market Committee (FOMC) will be in the spotlight.
The services sector activity in the United States accelerated in December. Data released by the Institute for Supply Management (ISM) showed that Services PMI increased to 54.1 in December from 52.1 in November. This reading came in stronger than the estimation of 53.3.
Meanwhile, US job openings unexpectedly increased in November, although hiring slowed during the month. US JOLTS Job Openings rose to 8.09 million in November versus 7.83 million prior and came in above the market consensus of 7.7 million.
The reports indicated a generally stable jobs market and a still robust services sector, which might convince the Fed to slow the pace of rate cuts, lifting the Greenback. According to the CME FedWatch tool, the US rate futures market has priced in a 93.5% chance of a pause in rate cuts this month.
Investors will monitor how aggressive President-elect Donald Trump's tariff policies could be when he takes office. Analysts believe that if US tariffs are broadly lower than Trump promised on the campaign trail and aimed only at "critical" sectors, then the outlook for global growth should improve and the USD should weaken. Additionally, the supportive 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 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.
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 recovers above 0.6200 after an early dip
Wall Street shrugged off fears ahead of the close and trimmed Trump-inspired losses, helping AUD in its way up. Australia will release in the Asian session November Retail Sales and Exports and Import figures for the same month.
EUR/USD hovers around 1.0320 after another moved American session
The EUR/USD pair trades around 1.0320 after falling to 1.0275. Employment data, a cautious Federal Reserve, and President-elect Donald Trump tariffs shook financial boards and kept investors in cautious mode.
XAU/USD holds on to gains around $2,660
Gold price retains risk-inspired gains. The benchmark 10-year US Treasury bond yield holds at its highest level since late April near 4.7%, limiting XAU/USD directional strength. US markets will remain closed on Thursday.
Crypto Today: BTC drops 3% despite $52M ETF inflows as Chainlink launches Ripple’s RLUSD
Mega-cap assets like XRP and exchange tokens BNB and BGB showcased resilience, defying broader market weakness spurred by an ongoing liquidation event that wiped over $150 billion from global crypto market capitalization in the past 24 hours.
Bitcoin edges below $96,000, wiping over leveraged traders
Bitcoin's price continues to edge lower, trading below the $96,000 level on Wednesday after declining more than 5% the previous day. The recent price decline has triggered a wave of liquidations across the crypto market, resulting in $694.11 million in total liquidations in the last 24 hours.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.