NZD/USD holds losses below 0.5950 ahead of US CPI data
- NZD/USD remains subdued as traders adopt caution ahead of US inflation data due on Tuesday.
- The US Consumer Price Index is expected to climb 0.2% MoM, easing from the 0.3% gain recorded in June.
- The New Zealand Dollar weakened after Prime Minister Christopher Luxon remarked that US tariff relief is unlikely.
NZD/USD extends its losses for the second successive session, trading around 0.5930 during the early European hours on Tuesday. The pair faces challenges as the US Dollar (USD) remains stable amid market caution ahead of the US consumer inflation data, due later in the North American session.
The July US Consumer Price Index (CPI) is forecast to rise 0.2% month-over-month, slightly below June’s 0.3% increase, while the annual rate is projected to accelerate for the third consecutive month to 2.8%. Core CPI is also anticipated to pick up to 0.3%.
Traders raise their bets on pricing in two interest rate cuts by the US Federal Reserve (Fed) in 2025, boosted by weaker data on US jobs and PMI. Markets are now pricing in approximately 84% odds of a Fed rate cut at the September meeting, down from 90% a week ago, according to the CME FedWatch tool.
The NZD/USD pair remains subdued as the New Zealand Dollar (NZD) struggles after New Zealand (NZ) Prime Minister Christopher Luxon recently commented that US tariff relief is unlikely, following a hike in tariffs on the country’s exports to 15% from 10%.
However, the downside of the NZD/USD could be restrained as the New Zealand Dollar may draw support from improved global trade sentiment, as the Trump administration agreed to postpone the implementation of sweeping tariffs on China for an additional 90 days. It is important to note that any change inthe Chinese economy could impact the NZD as China and New Zealand are close trade partners.
The decision came just hours before the previous agreement between the world’s two largest economies was set to expire. In response, China’s Commerce Ministry announced it would suspend additional tariffs on US goods for the same period, following Trump’s executive order extending the tariff truce.
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
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.
