NZD/USD price remains below 0.5650 as tariffs weigh on Kiwi
NZD/USD struggles near 0.5635 as Fed’s hawkish stance and RBNZ outlook weigh on Kiwi
The NZD/USD pair is trading near 0.5635 during the early Asian session on Tuesday, showing mild losses ahead of the New Year holiday. Market sentiment is subdued as traders monitor upcoming Chinese PMI data and assess the Federal Reserve’s dovish policy adjustments.
Meanwhile, dovish expectations from the Reserve Bank of New Zealand (RBNZ) and potential U.S. tariffs further pressure the Kiwi.
NZD/USD price movement (Oct 2024 - Dec 2024) Source: TradingView.
Fed cautious stance and U.S. economic data support the dollar
The Federal Reserve’s decision to reduce interest rates by just 25 basis points in December and limit projected 2025 rate cuts to two from four has bolstered the U.S. Dollar’s strength. Additional support for the greenback comes from better-than-expected U.S. Pending Home Sales, which rose 2.2% in November compared to the 0.7% forecast. However, the Chicago PMI fell to 36.9 in December, missing expectations and highlighting ongoing economic uncertainties.
The New Zealand Dollar continues to struggle, having fallen over 10% against the greenback this year. This weakness is attributed to the RBNZ’s dovish policy outlook and concerns over Donald Trump’s tariff threats, including a 25% levy on imports from Canada and Mexico. These factors have limited the Kiwi’s upside, even as investors remain cautious about the broader global economic landscape.
China stimulus measures could limit NZD losses
Fresh stimulus measures from China provide a glimmer of hope for the Kiwi. As New Zealand's largest trading partner, China's announcement of financial aid for citizens and benefits for the unemployed ahead of a national holiday could bolster New Zealand’s export-driven economy. Traders will closely watch the upcoming Chinese PMI data for further direction on the pair.
As NZD/USD remains below 0.5650, traders are focused on key developments, including the effectiveness of Chinese stimulus measures, U.S. economic data, and the RBNZ’s policy decisions. The pair’s trajectory will depend on whether these factors can offset headwinds from a strong U.S. Dollar and potential trade disruptions.
Previously, we analyzed the NZD/USD struggles around 0.5615 due to China’s economic slowdown and dovish RBNZ sentiment, which continue to shape the pair’s performance.
