New Zealand Dollar weakens ahead of China PMI data
- NZD/USD falls despite New Zealand's ANZ-Roy Morgan Consumer Confidence Index rising 8 points to 99.3 in July.
- The US Dollar gains despite easing risk aversion driven by recent diplomatic developments.
- Pakistan confirmed ongoing US-Iran negotiations aimed at restoring stability in the Strait of Hormuz.
NZD/USD loses ground after three days of gains, trading around 0.5870 during the Asian hours on Friday. Traders are treading cautiously while awaiting the release of China's Purchasing Managers Index (PMI) data scheduled for later in the day.
Meanwhile, consumer sentiment in New Zealand showed signs of recovery as the ANZ-Roy Morgan Consumer Confidence Index jumped 8 points to 99.3 in July. While this marks its highest level since February, it remains 19 points below its January peak. Broader economic expectations for the year ahead also improved, rising from -23% to -13% for its strongest reading since February, alongside a 5-point gain in the five-year outlook to +12%.
Strategists at Brown Brothers Harriman highlight that the New Zealand Dollar has continued to firm, noting that “NZD is up against all major currencies” even as “New Zealand bonds underperformed peers.” They add that the latest ANZ July business outlook survey “was good, and indicative of an ongoing recovery in real GDP growth,” reinforcing the view that domestic momentum is improving even as local fixed income lags.
The NZD/USD pair depreciates as the US Dollar (USD) strengthens, defying a broader environment of easing risk aversion driven by diplomatic developments. Pakistan's Foreign Ministry spokesperson, Tahir Andrabi, confirmed that negotiations between the US and Iran are currently ongoing to restore stability, particularly within the critical Strait of Hormuz.
Fed press conference underscores resolute 2% inflation goal, supports stronger Dollar bias
The FOMC press conference tone was clearly more hawkish, with the 7/10 FXS Speechtracker score running above the 6/10 historical average and emphasizing “only one target and it is 2%” alongside a warning that “inflation cannot be cured in 9 weeks.” The repeated stress on impressive economic resilience, materially higher nominal and real yields, and a refusal to tolerate a higher inflation target signals a firm commitment to restrictive policy for longer, even as the Committee “steers clear of forecasting” and leans on trend-based assessment rather than short-term data dependence. This combination of confidence in the policy team and insistence on delivering the 2% target reinforces a hawkish bias that is typically supportive for the Dollar, especially against lower-yielding currencies.
The FXS Fed Sentiment Index jumped by 18.94 points to 147.58, firmly in hawkish territory and well above the neutral 100 line, aligning with the above-baseline FXS Speechtracker score and the strong anti-inflation rhetoric. Such a sharp move higher in the FXS Fed Sentiment Index underscores that markets are likely to price in a more persistent restrictive stance, favoring the Dollar on rate differentials and keeping pressure on risk-sensitive FX pairs.
Geopolitical developments in the Middle East saw further movement following statements from US President Donald Trump, who claimed his "Board of Peace" reached a historic agreement for the complete disarmament of Hamas and other armed groups in Gaza, after which Israel would exit the territory. Senior Hamas officials have reportedly confirmed reaching a deal to end the conflict with Israel following the announcement.
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.
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