NZD/USD remains above 0.6000, moves little after China’s economic data release
- NZD/USD remains silent amid escalating geopolitical tensions in the Middle East.
- China’s Retail Sales advanced 6.4% YoY in May, against the expected 5.0% rise.
- Business NZ PSI fell to 44.0 in May from April’s 48.1, marking its lowest level since June 2024.
NZD/USD holds gains following the release of mixed economic data from China, trading around 0.6020 during the Asian hours on Monday. The National Bureau of Statistics (NBS) reported that China’s Retail Sales rose 6.4% year-over-year in May, surpassing the 5.0% expected and April’s 5.1% increase. Meanwhile, Industrial Production increased 5.8% YoY but below the 5.9% forecast and 6.1% prior.
Moreover, the National Bureau of Statistics (NBS) in China noted in its press conference on Monday that domestic economy is expected to have remained generally stable for the first half (H1) of 2025. However, China may face challenges to maintain stable growth since the second quarter due to factors such as increased uncertainty in trade policies.
In New Zealand, Business NZ Performance of Services Index (PSI) declined to 44.0 in May from April’s 48.1. This has marked its lowest level since June 2024 and was the fourth consecutive month of contraction.
However, the upside of the NZD/USD pair could be limited due to risk aversion, driven by the escalating tensions in the Middle East. Israel and Iran continue attacking each other despite international calls for diplomacy and de-escalation, per CNN. Iran fired multiple waves of ballistic missiles toward Israel. The Iranian Revolutionary Guard said their missiles successfully targeted Israeli military-industrial centers and fuel facilities.
Iran informed mediators Qatar and Oman that it will not enter negotiations while under attack. A source denied reports that Tehran had approached Oman and Qatar with a request to engage the United States (US) to broker a ceasefire with Israel.
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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