NZD/USD remains steady near 0.6050 ahead of US PMI data
- NZD/USD may lose ground as the US Dollar edges higher ahead of the S&P US Global Purchasing Managers Index data.
- Market sentiment improves as the European Union and the United States are nearing to reach an agreement.
- RBNZ’s Conway said that the central bank is set to deliver a rate cut if inflation continues to ease.
NZD/USD extends its gains for the third successive session, trading around 0.6050 during the early European hours on Thursday. The upside of the pair could be restrained as the US Dollar (USD) attempts to recover losses ahead of the S&P US Global Purchasing Managers Index (PMI) data for July later on the day.
However, the Greenback may further lose ground amid risk-on sentiment, driven by the optimism over further trade deals between the United States (US) and key partners. The Financial Times reported that the European Union (EU) and the United States (US) are closing in on a deal that would impose 15% tariffs on EU goods imported into the US. Additionally, US President Donald Trump announced on Tuesday a major tariff deal with Japan, which includes a 15% tariff on Japanese exports.
Traders are also seeking clarity on talks with China, with Treasury Secretary Bessent scheduled to meet Chinese officials later in the week. On the monetary policy front, markets are focused on next week’s Federal Reserve meeting, where rates are expected to be kept on hold, with potential cuts anticipated in October.
Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway noted on Thursday that tariffs will mean a weaker global economy and weaker demand, and the country will constantly monitor data. Conway also highlighted that the central bank is prepared to cut interest rates further if price pressures continue to ease as anticipated.
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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