NZD/USD price drops below $0.5650 amid stronger U.S. dollar and market concerns
NZD/USD struggles near 0.5650 amid USD strength
The NZD/USD pair extended its losing streak for the third consecutive session on Thursday, trading around 0.5660 during European hours. The continued decline was driven by the appreciation of the U.S. dollar (USD) amid market anticipation of a hawkish stance from the Federal Reserve (Fed) and broader global uncertainties.
Traders will closely watch the release of key U.S. economic indicators and the impact of Trump's trade policies for further market direction. Meanwhile, the NZD/USD pair remains vulnerable to USD strength and global uncertainties, with significant focus on developments in U.S.-China relations and domestic policy adjustments in New Zealand.
NZD/USD price analysis (Dec 2024 - Jan 2025) Source: TradingView.
Stronger U.S. dollar Pressures NZD/USD
Hawkish sentiment surrounding the Fed's policy stance boosted the U.S. dollar. The CME FedWatch tool showed a strong consensus among traders that the Fed would maintain interest rates within the 4.25%-4.50% range across the next three policy meetings. Expectations of just one more rate cut in 2025 were reinforced by President Donald Trump's tariff policies, which are projected to fuel inflationary pressures.
Additionally, upcoming U.S. economic indicators, including Initial Jobless Claims, S&P Global PMI, and the Michigan Consumer Sentiment Index, are likely to shape the near-term economic outlook. Weekly Initial Jobless Claims are expected to rise slightly to 220,000 from the previous 217,000, further influencing the USD's strength.
NZD struggles despite stimulus efforts
The New Zealand dollar (NZD) failed to gain traction despite the announcement of new stimulus measures by New Zealand and its key trading partner, China. New Zealand’s Prime Minister Christopher Luxon revealed plans to ease foreign investment regulations, aiming to attract overseas investors. However, these measures were overshadowed by global uncertainties and the dominance of a stronger USD.
Similarly, China introduced stabilization efforts, including allowing pension funds to increase investments in domestic equities and launching a pilot scheme enabling insurers to purchase equities. The initial scale of the pilot, at least 100 billion Yuan, reflects China's commitment to stabilizing its financial markets. Nevertheless, the NZD's weakness highlights broader market concerns and risk-averse sentiment.
We previously noted that RBNZ’s softer inflation data and dovish monetary stance added downward pressure on the NZD/USD, coupled with global trade uncertainties stemming from Trump's tariff threats. These factors continue to dominate the pair’s trajectory.
