NZD/USD gathers strength to near 0.5900 ahead of US Retail Sales, PPI data
- NZD/USD gains ground to around 0.5900 in Thursday’s Asian session, adding 0.10% on the day.
- Optimism from a tariff deal between the US and China lifts the China-proxy Kiwi.
- Traders will closely watch the US April Retail Sales and PPI data, due later on Thursday.
The NZD/USD pair trades in positive territory near 0.5900 during the Asian trading hours on Thursday. The New Zealand Dollar (NZD) strengthens against the Greenback due to improved risk sentiment. Later on Thursday, investors will closely watch the US Retail Sales and Producer Price Index (PPI) for April. Also, the Federal Reserve (Fed) Chair Jerome Powell is scheduled to speak.
Signs of de-escalation of a US-China trade war provide some support to the China-proxy Kiwi, as China is a major trading partner of New Zealand. The US and China reached a deal to temporarily cut reciprocal tariffs and tamped down concerns of a trade war between the world's two biggest economies. The US lowered tariffs on Chinese imports to 30% from 145%, while China cut tariffs on US imports to 10% from 125%. The lower tariff rate is effective for 90 days.
The top-tier US economic data and Fed’s Powell speech on Thursday might offer some hints about the US economic outlook and interest rate path. Any hawkish comments from Fed officials could boost the US Dollar and create a headwind for the pair.
San Francisco Fed President Mary Daly said late Wednesday that the strength of the US economy allows policymakers to be patient as they wait for more evidence of how US President Donald Trump’s policies will affect businesses and households.
Meanwhile, markets have dialed back expectations for rate cuts from the Fed this year, pricing in a 74% possibility of the first cut of at least 25 basis points (bps) at the September meeting, according to LSEG data, compared with the prior view for a cut in July.
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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