NZD/USD price recovers modestly amid China trade data but faces USD strength
NZD/USD modest rebound after multi-year low
The NZD/USD pair kicked off the week on a positive note, rising to 0.5565 during Monday’s Asian trading hours after reaching its lowest level since October 2022 last Friday. The recovery comes despite a lack of a significant catalyst and is closely linked to China’s latest trade data release, which reported an expanded trade surplus.
According to the Customs General Administration of China, the trade surplus widened to CNY752.91 billion in December from CNY692.8 billion previously, driven by a 10.9% year-on-year surge in exports. Meanwhile, imports grew by 1.3% year-on-year compared to 1.2% in November.
The data provided some support to risk-sensitive currencies like the New Zealand dollar (Kiwi), yet market sentiment remained fragile due to persistent concerns over China’s economic outlook. Investors are closely watching how China’s recovery prospects will impact commodity-driven currencies, including the NZD.
NZD/USD price dynamics (Oct 2024 - Jan 2025) Source: TradingView.
Hawkish Fed sentiment limits gains
The US dollar maintained its robust position, hovering near a two-year high, as hawkish expectations surrounding the Federal Reserve's policy continued to underpin the greenback. The upbeat US Nonfarm Payrolls (NFP) report, which showed 256,000 jobs added in December compared to an expected 160,000, reinforced the belief that the Fed will pause further rate cuts. Additionally, the unemployment rate unexpectedly dipped to 4.1% from 4.2% in November, signaling sustained resilience in the US labor market.
The combination of strong US economic data and heightened geopolitical risks has kept safe-haven assets, including the USD, in demand. In contrast, the Reserve Bank of New Zealand (RBNZ) faces mounting pressure to implement policy easing measures, further capping the NZD’s upside potential.
Trade dynamics and central bank moves
With concerns over a global economic slowdown still looming, market participants remain cautious about the sustainability of the NZD’s recovery. Key factors to watch in the coming days include China’s economic indicators and the upcoming Federal Reserve policy decision. A shift in investor sentiment or stronger Chinese economic performance could provide the Kiwi with additional support. However, any signals of deeper RBNZ policy easing could weigh heavily on the pair.
In our previous analysis, we discussed the NZD/USD's fall below 0.5600 amid a strengthening USD driven by robust NFP data and concerns about China’s economic outlook, reinforcing the bearish sentiment.
