NZD/USD price recovers as China rate cuts signal boosts sentiment
NZD/USD rebounds above 0.5600 amid China’s stimulus hopes
The NZD/USD pair climbed to 0.5605 in the early European session, gaining 0.26%, after reports that the People’s Bank of China (PBoC) is considering interest rate cuts. The move reflects optimism surrounding China’s economic recovery, benefiting the New Zealand Dollar (NZD) due to its trade ties with China.
The Financial Times reported that the Chinese central bank plans to lower rates “at an appropriate time” in 2025. Supporting this, the National Development and Reform Commission (NDRC) emphasized confidence in China’s 2025 recovery and hinted at ample room for macroeconomic policies. Given New Zealand’s reliance on China as a key trading partner, these developments provided a positive tailwind for the Kiwi.
NZD/USD price dynamics (Oct 2024 - Dec 2024) Source: TradingView.
Tariff concerns and Fed pol cy weigh on upside
Despite optimism from potential Chinese rate cuts, concerns linger about US trade policies under President-elect Donald Trump. His proposed 25% tariffs on imports from Canada and Mexico, along with 10% tariffs on Chinese goods, could further strain China’s economy, with ripple effects impacting New Zealand.
Additionally, the Federal Reserve’s cautious approach to rate cuts may support the US Dollar (USD). The Fed has signaled that only two rate reductions are expected in 2025, down from the four initially forecast, due to inflation remaining above 2%. This policy stance could dampen the upside potential for NZD/USD by reinforcing demand for the USD.
The NZD/USD pair’s trajectory depends on further clarity regarding US-China trade relations and upcoming economic data releases. If China announces concrete rate cuts or if inflation eases in the US, the pair may see further volatility. Traders are also keeping a close eye on the next Federal Reserve meeting for any adjustments to rate expectations.
Previously, we discussed NZD/USD’s challenges near 0.5635 amid weak Chinese data and RBNZ’s dovish sentiment, which have continued to shape its performance.
