NZD/USD holds positive ground, China CPI falls in May

NZD/USD gathers strength to around 0.6035 in Monday’s Asian session, up 0.50% on the day.
China’s CPI inflation fell for a fourth consecutive month in May.
Chinese officials are expected to meet with the US trade negotiation team in London later on Monday for renewed trade talks.

Lallalit Srijandorn FXStreet

The NZD/USD pair attracts some buyers to around 0.6035 during the Asian trading hours on Monday. The New Zealand Dollar (NZD) strengthens against the Greenback after the Chinese inflation data. Traders will closely monitor trade talks between the US and China later on Monday.

Data released by the National Bureau of Statistics of China on Monday showed that the country’s Consumer Price Index (CPI) declined 0.1% YoY in May, compared to -0.1% seen in April. This figure came in above the market expectation of -0.2%.

On a monthly basis, Chinese CPI inflation eased to a decline of 0.2% in May versus April’s 0.1% rise Additionally, China’s Producer Price Index (PPI) fell 3.3% YoY in May, following a 2.7% decline in April. The data came in below the market consensus of 3.2%.

The Kiwi remains strong in an immediate reaction following the mixed Chinese economic data. The attention will shift to the US-China trade talks. US President Donald Trump stated on Friday that US Treasury Secretary Scott Bessent and two other Trump administration officials are scheduled to talk with Chinese officials in London on Monday. The hope of potential trade negotiations between the world’s two largest economies provides some support to the China-proxy Kiwi, as China is a major trading partner of New Zealand.

On the other hand, the renewed US Dollar demand due to stronger-than-expected US economic data, including the May jobs data, could lift the USD and act as a headwind for the pair. The US Nonfarm Payrolls (NFP) climbed by 139,000 in May, compared to the 147,000 increase. This reading came in above the market consensus of 130,000. Federal Fund Futures pointed to a larger chance that the US Federal Reserve (Fed) may keep its benchmark interest rate steady until the September monetary policy meetings.

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

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.

GBP/USD remains weaker as UK-US yields narrow

GBP/USD extends its losses for the second consecutive day, trading around 1.3450 during the Asian hours. The pair depreciates as the British Pound softens even as United Kingdom political risk fades.

EUR/USD weakens amid Middle East tensions

EUR/USD extends its losses for the second consecutive day, trading around 1.1520 during the Asian hours. The currency pair faces downward pressure as the US Dollar gains strength, propelled by renewed safe-haven demand among global investors.

How Wall Street rigs the game [Video]

In this week’s Live from the Vault, Andrew Maguire is joined by Peter Antico and Sean Stone to discuss the Paradigm of Money - an in-depth expose of financial market corruption, from naked shorting to the two-tier system that protects Wall Street.

Bitcoin under pressure, Ethereum trades sideways, Ripple gravitates toward $1

Bitcoin and Ethereum remain under pressure after mild gains, while Ripple slides over 5% so far this week. BTC faces rejection near a key resistance barrier, and ETH has been trading sideways for the last 22 days. At the same time, XRP is gravitating its correction toward the key $1 support zone.

Markets question Fed's inflation resolve after July FOMC meeting

Federal Reserve Chairman Kevin Warsh continues to project a tough stance on inflation, repeatedly promising to restore price stability and keep inflation anchored at the central bank's longstanding 2% target. But according to Mike Maharrey in this week's Money Metals Midweek Memo, markets are beginning to judge the Fed by its actions rather than its rhetoric—and so far, they aren't convinced.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.