NZD/USD price steadies near $0.565 as traders assess weak labor data
NZD/USD remains range-bound as market sentiment reacts to China’s tariffs
NZD/USD remains steady around 0.565 in early Wednesday trading after New Zealand’s employment data and China’s services PMI failed to provide a clear directional push. The New Zealand dollar initially shrugged off weaker domestic economic indicators, with traders instead focusing on U.S.-China tariff tensions and the U.S. Federal Reserve’s policy outlook.
China’s Caixin services PMI declined to 51 in January, down from 52.2 in December, missing market expectations of 52.3. As China is New Zealand’s largest trading partner, this slowdown in economic activity could dampen demand for New Zealand exports, potentially putting further pressure on the kiwi.
NZD/USD price dynamics (Oct 2024 - Feb 2025) Source: TradingView.
New Zealand’s labor market weakens, fueling rate cut expectations
New Zealand’s unemployment rate increased to 5.1% in Q4 2024, up from 4.8% in the prior quarter, marking the highest level since September 2020. The employment rate fell to 67.4%, and the underutilization rate edged up to 12.1%, signaling a weakening labor market. These figures reinforced speculation that the Reserve Bank of New Zealand (RBNZ) may introduce a 50 basis point rate cut later this month to stimulate economic growth.
Despite weak employment figures, the kiwi remained relatively stable as traders focused on China’s retaliatory tariffs and the broader risk-off sentiment stemming from ongoing trade tensions with the United States.
U.S. dollar outlook and trade tensions keep NZD/USD in focus
The U.S. dollar index (DXY) is under pressure for a third consecutive day, trading around 108, as investors weigh the impact of U.S. nonfarm payrolls (NFP) data set for release on Friday. Markets anticipate a slight slowdown in job growth, which could influence the Federal Reserve’s next policy move.
Meanwhile, China imposed 15% tariffs on U.S. coal and liquefied natural gas (LNG), alongside additional duties on crude oil and farm equipment. These measures were taken in response to Washington’s 10% tariff on Chinese imports, which went into effect on Tuesday. While U.S. President Donald Trump has hinted at upcoming discussions with China, the lack of a confirmed meeting has kept market sentiment cautious.
NZD/USD remains range-bound, with traders watching for further developments in U.S.-China trade talks and New Zealand’s interest rate outlook. A break above 0.5680 could open the door to further gains, while failure to hold support at 0.56 may push the pair toward 0.5530 - 0.55.
As previously discussed the kiwi dollar’s movement remains influenced by global risk sentiment, with tariff uncertainty and weak domestic data weighing on its outlook, while the Fed’s interest rate trajectory remains a key focus.
