NZD/USD edges lower despite softer US Dollar, weighed by China-linked concerns

The New Zealand Dollar (NZD) slides lower against the US Dollar (USD) on Tuesday, with NZD/USD slipping to 0.5910 in early American trading hours. The move marks a mild pullback from the previous day's recovery, as traders react to China’s latest interest rate cut, which raised fresh concerns over slowing growth in the region.

The Kiwi remains within a consolidative range but is struggling to build momentum as selling pressure emerged after the People’s Bank of China (PBoC) lowered both of its key lending benchmarks. The one-year loan prime rate (LPR) — the reference for most business and household loans — was cut by 10 basis points to 3.0%, while the five-year LPR, which influences mortgage rates, was also reduced by 10 bps to 3.5%. The move, aimed at stimulating domestic demand, highlighted persistent concerns about China's sluggish recovery, weighing on currencies with close trade ties to the Chinese economy, including the New Zealand Dollar.

Latest economic data released on Monday showed that the BusinessNZ Services PMI slipped to 48.5 in April, marking a second consecutive month of contraction. While the weak services data highlights ongoing domestic headwinds, it was partially offset by a sharp rebound in producer prices. Q1 input prices rose 2.9%, while output prices climbed 2.1%, the strongest gains since mid-2022. While markets still expect the Reserve Bank of New Zealand (RBNZ) to cut rates by 25 basis points later this month,  the inflation rebound may temper expectations for a more aggressive easing path.

Looking ahead, traders will turn their focus to a packed domestic calendar. New Zealand’s trade balance is due late Tuesday, followed by the government’s annual budget release on Thursday, expected to slash 2025 baseline spending to NZ$1.3 billion from NZ$2.4 billion. Friday’s Q1 retail sales report will provide a fresh update on consumer activity.

Meanwhile, the US Dollar remains on the defensive, as sentiment weakened following Moody’s downgrade of the US credit rating from Aaa to Aa1. The move was driven by rising concerns over ballooning US government debt and an expanding budget deficit