NZD/USD gathers strength to near 0.5950 as Trump extends China tariff deadline by another 90 days
- NZD/USD edges higher to near 0.5940 in Tuesday’s early Asian session.
- Trump announced another 90-day pause on China tariffs.
- The US CPI inflation report for July will take center stage later on Tuesday.
The NZD/USD pair gains ground to around 0.5940 during the early Asian session on Tuesday. The New Zealand Dollar (NZD) strengthens against the Greenback after US President Donald Trump extends the China tariff deadline by another 90 days. Traders will keep an eye on the US July Consumer Price Index (CPI) report, which is due later on Tuesday.
Reuters reported late Monday that the Trump administration agreed to delay implementing sweeping tariffs on China, extending another 90 days just hours before the last agreement between the world’s two largest economies was due to expire.
Meanwhile, China’s Commerce Ministry announced that the country will suspend additional tariffs on US goods for 90 more days, after Trump signed an executive order extending the tariff truce. Positive trade outcomes provide some support to the China-proxy Kiwi, as China is a major trading partner of New Zealand.
However, the concerns over persistent deflationary pressure in China might cap the upside for the NZD. Data by the National Bureau of Statistics (NBS) on Saturday showed China’s Producer Price Index (PPI) fell more than expected in July. This report suggested the impact of sluggish domestic demand and ongoing trade uncertainty on consumer sentiment.
Traders will shift attention to the US CPI inflation report later in the day, which offers some cues about the US interest rate path this year. The headline CPI is estimated to show an increase of 2.8% YoY in July, while the core CPI is projected to show a rise of 3.0% YoY during the same report period. In case of a hotter-than-expected outcome, this could underpin the USD and create a headwind for the pair.
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.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
