NZD/USD price declines as traders eye Fed rate cut decision
NZD/USD drops near 0.5750 on Fed rate cut expectations
The NZD/USD pair continued its downward trajectory, trading near 0.5750 during Wednesday’s Asian session. The pair remains pressured as traders anticipate the US Federal Reserve's (Fed) expected 25 basis point rate cut, which would bring the federal funds rate to a range of 4.25%-4.50%.
The market is also focused on the Fed’s Summary of Economic Projections (‘dot-plot’) and Chair Jerome Powell’s press conference for further monetary policy cues.
Mixed U.S. economic data added complexity to the NZD/USD outlook. Retail Sales outperformed expectations, rising 0.7% month-over-month in November, while Industrial Production fell 0.1%, missing the expected 0.3% increase. Meanwhile, New Zealand’s current account deficit narrowed significantly from $10.581 billion in Q3, down from $4.826 billion previously, driven by reduced imports.
NZD/USD chart (Oct 2024 - Dec 2024) Source: Trading View
Global Trade and Chinese Economic Concerns
The Kiwi faced additional headwinds from global trade risks, including former US President Donald Trump’s proposal of a 10% tariff on Chinese imports. Further complicating the outlook, China’s Retail Sales data fell short of expectations, adding pressure to the New Zealand Dollar given China’s role as a key trading partner.
If the Fed signals a slower pace of rate cuts in 2025, the US Dollar could strengthen further, intensifying selling pressure on NZD/USD. On the technical front, the next support target for NZD/USD is 0.5670, with resistance at 0.5825.
Previously, we discussed NZD/USD’s resilience amid global economic uncertainties, driven by China’s trade data and the Fed’s policy outlook.
