NZD/USD price fluctuates amid mixed outlook and inflation-driven market sentiment
Cardano price hovers near $1.00, testing support and resistance
The New Zealand dollar (NZD) traded at around $0.561 on Wednesday, extending gains for a third consecutive session. The pair’s recent movement reflects mixed market sentiment, as highlighted by UOB Group analysts Quek Ser Leang and Peter Chia, who noted that the NZD/USD could continue to trade within a range of 0.5540 to 0.5650 due to "whippy" price action.
In the near term, they predict a narrower range between 0.5570 and 0.5635, indicating potential consolidation.
NZD/USD price dynamics (November 2024 - January 2025) Source: TradingView.
Impact of US inflation data and trade tariff concerns
The uptick in the New Zealand dollar was largely supported by softer-than-expected US Producer Price Index (PPI) data for December, which weakened the greenback. Investors are awaiting the US Consumer Price Index (CPI) report due later today, anticipating crucial insights into the Federal Reserve’s next monetary policy moves.
Additionally, speculation that President-elect Donald Trump may adopt a more strategic and less abrupt approach to imposing tariffs has contributed to easing global trade tensions, indirectly benefiting the New Zealand dollar. The prospect of reduced trade uncertainty could offer further support to risk-sensitive currencies like the NZD.
Despite the recent rebound, domestic economic concerns continue to weigh on the NZD. Market participants expect the Reserve Bank of New Zealand (RBNZ) to lower its cash rate from 4.25% by 50 basis points in February, reflecting the ongoing economic challenges faced by New Zealand. These expectations have capped the currency's upside potential.
Outlook: Investors eye US CPI data for market direction
As markets brace for the upcoming US CPI report, the NZD/USD pair may remain range-bound. A higher-than-expected CPI reading could strengthen the US dollar, exerting downward pressure on the NZD. Conversely, a softer inflation print may sustain the Kiwi’s upward momentum.
In our previous analysis, we discussed the NZD/USD's modest recovery from a multi-year low, driven by China’s favorable trade data and the US dollar's strength following robust Nonfarm Payrolls (NFP) data. The ongoing tug-of-war between global trade tensions and domestic economic pressures continues to influence the pair's direction.
