NZD/USD price nears 0.5600 as sentiment weakens after Chinese CPI data
NZD/USD trades near 0.5600 after China CPI repor
The NZD/USD pair remains under pressure, hovering around 0.5600 during Thursday’s Asian session after China’s Consumer Price Index (CPI) data came in lower than the previous reading. The CPI rose by 0.1% year-on-year in December, down from November’s 0.2% increase, aligning with market expectations. On a month-on-month basis, inflation remained flat at 0%, following a 0.6% decline in the previous month, indicating muted price pressures in the Chinese economy.
The Federal Open Market Committee (FOMC) December meeting minutes revealed concerns about inflation and the potential economic impact of President-elect Donald Trump’s policies. Fed officials downgraded their interest rate cut projections for 2025 from four to two, emphasizing a cautious approach amid ongoing economic uncertainty.
NZD/USD price movement (Nov 2024 - Jan 2025) Source: TradingView.
Fed’s Hawkish Sentiment and US Data Weigh on NZD
The New Zealand dollar struggles as traders anticipate aggressive monetary easing from the Reserve Bank of New Zealand (RBNZ). Analysts predict a 50-basis-point rate cut at the February meeting, which could lower the cash rate to 3.75%. In contrast, the US dollar Index (DXY) remains firm at 109.00, supported by robust labor market data and hawkish Federal Reserve sentiment.
Initial US jobless claims dropped to 201,000 for the week ending January 3, below the 218,000 forecast, reflecting a resilient labor market. Additionally, ADP Employment Change showed a 122,000 rise in December, although slightly below market estimates of 140,000. Long-term US bond yields have also surged, with the 10-year yield reaching 4.73% and the 30-year yield approaching 4.96%, signaling investor concerns about inflation and increased bond issuance.
Looking ahead, market participants will closely monitor the upcoming US Nonfarm Payroll (NFP) report, which could provide further insights into the labor market and influence the Fed’s policy path. A stronger-than-expected NFP reading could further bolster the US dollar, intensifying pressure on the NZD/USD pair.
In our previous analysis, we highlighted how NZD/USD faced resistance near 0.5641 amid Fed-driven sentiment and geopolitical concerns. These factors continue to shape the pair’s movement, with downside risks prevailing amid strong US labor data and RBNZ rate cut expectations.
