NZD/USD consolidates amid mixed cues; trades below 0.6050 as traders await US CPI report
- NZD/USD stalls the overnight pullback from a two-week high, though it lacks bullish conviction.
- The risk-off impulse lends support to the safe-haven buck and acts as a headwind for the Kiwi.
- Traders also seem reluctant and opt to wait on the sidelines ahead of the crucial US CPI report.
The NZD/USD pair finds some support near the 0.6025 region during the Asian session on Friday and, for now, seems to have stalled the previous day's retracement slide from a two-week high. Spot prices, however, lack any firm intraday directional bias as traders opt to wait for the release of the latest US consumer inflation figures.
The crucial US Consumer Price Index (CPI) will be looked upon for fresh cues about the Federal Reserve's (Fed) policy outlook amid reduced bets for a rate cut in March in the wake of the upbeat US Nonfarm Payrolls (NFP) report on Wednesday. Traders, however, are still pricing in the possibility that the US central bank will lower borrowing costs two more times in 2026. This, along with rising threats to the Fed's independence, keeps the US Dollar (USD) bulls on the defensive and acts as a tailwind for the NZD/USD pair.
Apart from this, hopes for more fiscal and monetary stimulus from China offer some support to antipodean currencies, including the Kiwi. Meanwhile, a rise in New Zealand's Unemployment Rate in the fourth quarter of 2025 dampened expectations for any tightening by the Reserve Bank of New Zealand (RBNZ). Furthermore, the risk-off impulse, which tends to benefit the safe-haven Greenback, acts as a headwind for the New Zealand Dollar (NZD) and contributes to keeping a lid on the NZD/USD pair, warranting caution for bulls.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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