NZD/USD price slips below 0.5700 amid weak Chinese PMI and tariff uncertainty
NZD/USD dips below 0.5700 as weak Chinese PMI and tariff concerns weigh on the Kiwi
The NZD/USD pair fell to 0.5685 during Monday's Asian session as weak Chinese economic data and concerns over potential US tariffs weighed on the New Zealand dollar. China's Manufacturing PMI for January dropped to 49.1, falling below the neutral 50 level and indicating contraction.
Similarly, the Non-Manufacturing PMI declined to 50.2, from December's 52.2, adding to the bearish sentiment surrounding the Kiwi, given China’s role as New Zealand's key trading partner.US President Donald Trump’s uncertain tariff stance further pressured the Kiwi. While Trump hinted last week that a deal with China could be reached without imposing tariffs, traders remain cautious. This uncertainty adds to the challenges faced by the New Zealand dollar, which is already under the shadow of softer domestic economic data.
NZD/USD price dynamics (Dec 2024 - Jan 2025) Source: TradingView.
RBNZ rate cuts loom as Fed signals a pause
Weaker-than-expected New Zealand CPI inflation for Q4 2024 has fueled expectations that the Reserve Bank of New Zealand (RBNZ) will continue its easing cycle. Markets are pricing in a 90% chance of a 50-basis-point rate cut on February 19, with total reductions of 100 bps anticipated for the remainder of 2025. These rate cuts are expected to add further downward pressure on the NZD.
In contrast, the US Federal Reserve is widely expected to hold interest rates steady at its January meeting this Wednesday. However, analysts are closely monitoring Trump’s push for lower rates and the Fed's potential course of action later in the year. While a rate pause is the likeliest outcome this week, future cuts in March or later remain possible, depending on economic conditions.
Outlook remains bearish for NZD/USD
The combination of weak Chinese economic data, RBNZ rate cut expectations, and ongoing tariff uncertainty continues to weigh on the NZD/USD pair. Investors will closely watch the Fed's policy stance and developments in US-China trade relations for further direction.
In our earlier analysis, NZD/USD had surged to a five-week high near 0.5720 on optimism surrounding US-China trade relations, supported by Trump’s softer tone toward tariffs. However, this sentiment now seems to be overshadowed by weaker Chinese data and rising domestic and international uncertainties.
