NZD/USD remains below 0.5750 ahead of China’s trade balance
- NZD/USD holds losses due to market caution ahead of the release of China's trade data on Friday.
- Trump exempted Mexican and Canadian goods under the USMCA from his proposed 25% tariffs.
- US NFP is expected to increase to 160K in February, up from January’s softer reading of 143K.
NZD/USD halts its four-day losing streak, trading around 0.5730 during the Asian hours on Friday. The pair encounters challenges as market caution prevails ahead of the release of China's trade data and the US Nonfarm Payrolls (NFP) report later today.
Meanwhile, traders remain focused on global trade developments, as Canada postpones its planned second round of retaliatory tariffs on US products until April 2. This decision follows US President Donald Trump’s exemption of Mexican and Canadian goods under the USMCA from his proposed 25% tariffs.
US Initial Jobless Claims for the week ending March 1 dropped to 221K, compared to 242K in the previous week, according to the US Department of Labor (DOL) on Thursday. This figure came in below the market consensus of 235K. US NFP is expected to show a modest rebound in job growth. Projections suggest net job additions will rise to 160K in February, up from January’s subdued 143K.
According to MUFG Bank analysts, expectations are increasing that the Federal Reserve (Fed) may prioritize addressing slowing economic growth over elevated inflation in response to US tariffs, which could weigh on the US Dollar. A recent decline in consumer confidence indicates growing household concerns over the inflationary impact of tariffs and economic risks stemming from rising policy uncertainty in the United States (US).
The NZD/USD pair strengthened after Chinese officials pledged additional stimulus beyond the fiscal spending measures outlined in the government’s annual work report released on Wednesday. Given China’s position as New Zealand’s largest trading partner, this development provided support for the New Zealand Dollar (NZD).
China’s Finance Minister, Lan Foan, stated that the government remains open to further stimulus if the economy struggles to meet its 5% Gross Domestic Product (GDP) growth target. Additionally, People’s Bank of China Governor Pan Gongsheng reaffirmed a dovish stance on interest rates, stating that interest rate and Reserve Requirement Ratio (RRR) cuts will be implemented “at an appropriate time.”
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.
