NZD/USD breaks below 0.5600 due to a technical rebound in US Dollar

NZD/USD depreciates as the US Dollar Index halts its four-day losing streak on Friday.
Softer US Retail Sales and underlying inflation data reinforced the odds of the Fed cutting rates twice this year.
The NZD could regain its ground due to the robust economic data from China.

Akhtar Faruqui FXStreet

NZD/USD extends its losses for the second successive day, trading around 0.5590 during the European hours on Friday. The downside of the NZD/USD pair can be attributed to a technical improvement in the US Dollar (USD).

The US Dollar Index (DXY), which tracks the US Dollar’s (USD) performance against six major currencies, halts its four-day losing streak, trading near 109.20 at the time of writing. However, the Greenback encountered difficulties as weaker US Retail Sales and underlying inflation data bolstered market expectations that the Fed will reduce interest rates twice this year.

US Retail Sales rose by 0.4% MoM in December, reaching $729.2 billion. This reading was weaker than the market expectations of a 0.6% rise and lower than the previous reading of a 0.8% increase (revised from 0.7%).

Moreover, the US core Consumer Price Index (CPI), which excludes volatile food and energy prices, rose by 3.2% year-over-year (YoY) in December, slightly below both the previous month's 3.3% increase and market forecasts of 3.3%. On a monthly basis, the core CPI grew by 0.2%, compared to a 0.3% rise in the prior month.

Chicago Federal Reserve Bank President Austan Goolsbee stated on Thursday that he has grown increasingly confident over the past several months that the job market is stabilizing at a level resembling full employment, rather than deteriorating into something worse, according to Reuters.

However, the NZD/USD pair faced challenges as the New Zealand Dollar (NZD) gained ground due to the robust economic data from New Zealand’s close trading partner China. China’s Gross Domestic Product (GDP) grew 5.4% over the year in the fourth quarter of 2024 after reporting a 4.6% expansion in the third quarter. Data beat the market consensus of 5% in the reported period, by a wide margin.

Chinese GDP rate rose 1.6% QoQ in Q4 2024, having increased 0.9% in the previous quarter. This figure matched the expectations of 1.6%. The annual December Retail Sales increased by 3.7% vs. the 3.5% expected and 3.0% prior, while Industrial Production arrived at 6.2% vs. the 5.4% forecast and November’s 5.4%.

New Zealand Dollar FAQs

What key factors drive the New Zealand Dollar?

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.

How do decisions of the RBNZ impact the New Zealand Dollar?

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.

How does economic data influence the value of the New Zealand Dollar?

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.

How does broader risk sentiment impact the New Zealand Dollar?

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.

Author

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

AUD/USD stuck as the RBA talks tough into a slowdown

The Australian Dollar is going nowhere in a hurry, and the contradiction at its core explains why. The Reserve Bank of Australia keeps dangling the prospect of another hike, yet the economy it governs just expanded 0.3% in the first quarter, a clear step down from the prior pace. A central bank threatening to tighten into a visible slowdown is not a recipe for conviction in either direction, and the tape shows it.

USD/JPY: Japanese Yen coiled at the line, leaning on everyone but Japan

The Yen is doing very little, and that stasis is the whole story. USD/JPY sits glued near 160.00 not because Japan has found new strength, but because two outside forces are fighting to a draw over it: a US rate complex that keeps the dollar bid, and a Ministry of Finance that refuses to let the line break.

Gold declines below $4,500 on stalled US-Iran ceasefire talks, US NFP data looms

Gold price edges lower to near $4,470 during the early Asian session on Friday. The precious metal remains volatile amid ongoing geopolitical turmoil. Traders will closely monitor the developments surrounding the US-Iran peace deal and the US May employment report later on Friday.

Bitcoin falls below $64K as demand turns negative, short-term holders' selling intensifies

Bitcoin has fallen below $64,000 on Thursday amid weakening market demand and mounting selling pressure from short-term holders. The leading cryptocurrency slipped toward the $63,000 level amid a broader risk-off environment, with several key metrics signaling one of the most challenging periods of the current market cycle.

Nonfarm payrolls: Testing the limits of Fed policy patience

The upcoming nonfarm payrolls report for May will provide the final update on the US labor market before Kevin Warsh attends his first policy meeting as the new Fed Chair later this month.

Recession on paper: What really moves the Canadian Loonie now?

Statistics Canada handed the headline writers a gift and the analysts a headache. Real GDP shrank 0.1% on an annualized basis in the first quarter, and with the fourth quarter of 2025 revised down to a 1.0% contraction, that is two negative quarters in a row, the textbook definition of a technical recession and Canada's first since the pandemic.