NZD/USD appreciates to near 0.6050 despite a stable US Dollar, Initial Jobless Claims eyed
- NZD/USD maintains its position near its eight-month high of 0.6055.
- Trump posted that he likes President Xi but he is “VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!"
- The US Dollar may lose ground due to increased economic concerns following weaker US data.
NZD/USD extends its gains for the second successive day, trading around 0.6030 during the European hours on Thursday. The pair maintains its position near an eight-month high at 0.6055, recorded on June 3. The New Zealand Dollar (NZD) might have received support from China’s Caixin Services PMI, which rose to 51.1 in May as expected, from 50.7 in April.
Traders will closely monitor the developments surrounding the US-China trade talks. US President Donald Trump posted on Truth Social, saying, "I like President Xi of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!"
The upside of the NZD/USD pair could be restrained as the US Dollar appreciates, potentially driven by a technical correction. However, the Greenback may lose ground due to weakening risk sentiment as rising tariff uncertainty could potentially dampen growth in the US economy.
Economic uncertainty worsened following the weaker economic data from the United States (US). Institute for Supply Management's (ISM) Services Purchasing Managers Index (PMI) declined to 49.9 in May, from 51.6 in April. This reading surprisingly came in weaker than the expected 52.0. Meanwhile, US ADP private sector employment rose 37,000 in May, against a 60,000 increase (revised from 62,000) recorded in April, far below the market expectation of 115,000.
Traders will likely observe the US Balance of Trade and the weekly Initial Jobless Claims later in the North American session. On Friday, Nonfarm Payrolls will be eyed, seeking further impetus regarding the Fed’s policy outlook.
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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