NZD/USD gains ground amid easing trade tensions and weaker USD
- NZD/USD rises for the second straight session, reclaims 0.6000 psychological level.
- Kiwi supported by improved global risk sentiment and easing trade tensions.
- US and Japan strike tariff deal; US-EU reportedly close to similar 15% cap on key export tariff ahead of August deadline.
The New Zealand Dollar (NZD) extends gains for a second straight day against the US Dollar (USD) on Wednesday, as the Greenback remains under pressure amid a modest recovery in risk appetite following somewhat easing global trade tensions.
The NZD/USD pair is ticking higher and has climbed back above the 0.6000 mark during Wednesday’s American trading hours. At the time of writing, the pair is trading around 0.6037, up nearly 0.60% on the day as buyers regain control after falling for two consecutive weeks.
The Kiwi’s advance is underpinned by growing optimism around global trade after positive headlines helped ease investor jitters. On Tuesday, the United States and Japan struck a landmark deal to reduce planned tariffs on autos and industrial goods to 15%, while Japan committed to a $550 billion investment package into the US economy. This has lifted risk appetite across markets, with equities and commodity-linked currencies rallying in response.
Meanwhile, the US and the European Union (EU) are reportedly close to finalizing a similar agreement to cap tariffs at 15% across key exports, helping prevent a potential escalation ahead of the August 1 deadline. Though the EU is preparing a €93 billion retaliatory tariff package as a backup, markets remain hopeful that a deal will be reached in time. These developments, combined with signs of dialogue between Washington and Beijing — highlighted by US Treasury Secretary Scott Bessent’s meeting with Chinese officials next week to discuss extending the August 12 tariff truce — are reinforcing the risk-on mood. This is also keeping the US Dollar on the back foot, allowing the NZD to extend its rebound.
Fresh tailwinds for the Kiwi also come from domestic data, which painted a mixed but stabilizing picture of the New Zealand economy. The Consumer Price Index (CPI) rose by 0.5% QoQ in Q2, lifting annual inflation to 2.7% — just below expectations but still within the Reserve Bank of New Zealand’s (RBNZ) 1%-3% target band.
Earlier this month, the RBNZ held its Official Cash Rate steady at 3.25%, pausing its easing cycle. However, the central bank maintained a dovish tone, signaling openness to further policy easing if inflation continues to cool and growth remains subdued. Markets are now pricing in a roughly 75% chance of a 25-basis-point cut in August.
Looking ahead, attention now turns to key US economic data scheduled for Thursday, which could influence the next leg for the NZD/USD pair. The S&P Global flash Purchasing Managers Index (PMI) for July are due at 13:45 GMT, with the manufacturing index expected to hold near 52.5 and the services reading around 53. In addition, the weekly US Initial Jobless Claims report will be released earlier at 12:30 GMT, offering fresh insight into the labor market’s strength.
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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