NZD/USD slips as weak Chinese data weighs on kiwi despite RBNZ reassurance
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Daily Currency Update
The NZD/USD pair edged lower during the Asian trading session on Monday, as the New Zealand dollar came under pressure following the release of weaker-than-expected economic data from China. The disappointing figures dampened market sentiment and weighed on currencies closely linked to the Chinese economy, including the kiwi.China’s latest economic data pointed to ongoing softness in domestic demand and industrial activity, renewing concerns about the pace of recovery in the world’s second-largest economy. Given China’s role as a major trading partner for New Zealand, particularly for agricultural exports such as dairy products, any signs of slowing Chinese growth tend to have a direct impact on the New Zealand dollar. As a result, the kiwi struggled to attract buyers early in the week, allowing the US dollar to gain the upper hand.
Adding to the day’s developments, comments from Reserve Bank of New Zealand (RBNZ) Governor Anna Breman offered some insight into the central bank’s current policy outlook. Speaking early Monday, Breman noted that the economic outlook has evolved broadly in line with the expectations of the Monetary Policy Committee. She also highlighted that there are increasing signs suggesting economic growth is gradually recovering, providing some reassurance that the domestic economy remains on a stable footing.
The RBNZ Governor acknowledged that while there remains a small possibility of another interest rate cut, the Official Cash Rate (OCR) is likely to stay at its current level of 2.25% for an extended period, provided economic conditions continue to unfold as expected. This suggests that the central bank is comfortable maintaining a steady policy stance for now, rather than moving aggressively toward further easing.
The cautious but relatively balanced tone from the RBNZ may help limit downside pressure on the New Zealand dollar in the near-term. By signalling confidence in the ongoing recovery, the central bank has reduced expectations of imminent policy changes, which can help support the currency during periods of external uncertainty. However, traders remain mindful that global factors, particularly developments in China and movements in the US dollar are likely to continue driving near-term price action.
Looking ahead, the direction of the NZD/USD pair will depend on a combination of domestic economic indicators, central bank guidance and broader risk sentiment. While the latest Chinese data has weighed on the kiwi, reassurance from the RBNZ could provide some stability, keeping losses relatively contained as markets assess the balance between external headwinds and improving domestic conditions.
Key Movers
The US Federal Reserve delivered its third and final interest rate cut of the year last week, lowering rates by 25 basis points to a target range of 3.50% to 3.75%. The decision was widely anticipated by markets and reflects the central bank’s ongoing effort to balance slowing inflation with the need to support economic growth.During the post-meeting press conference, Fed Chair Jerome Powell emphasised that policymakers are now entering a period of observation. He noted that the Federal Open Market Committee needs time to assess how the three rate cuts implemented this year feed through to the broader US economy. Monetary policy, Powell reiterated, works with a lag, and the full impact of lower borrowing costs on consumer spending, business investment, and employment may take several months to become fully apparent.
Powell’s comments were interpreted as a signal that the Fed is in no immediate rush to make further adjustments to interest rates. While the door remains open to future moves if economic conditions warrant, the central bank appears comfortable maintaining its current policy stance while monitoring incoming data. This measured approach has helped temper expectations for additional rate cuts in the near-term, lending some stability to US Treasury yields and the US dollar.
Market participants are now turning their attention to upcoming economic data for fresh clues on the health of the US economy. In particular, traders will closely monitor the US Non-farm Payrolls (NFP) report for November, scheduled for release tomorrow. The employment report is one of the most closely watched indicators of labour market conditions and plays a crucial role in shaping Federal Reserve policy expectations.
The November NFP figures could provide greater clarity on whether the US labour market is beginning to show signs of cooling after a prolonged period of strength. Any meaningful slowdown in job creation, a rise in the unemployment rate, or softer wage growth could reinforce the view that higher interest rates are weighing on economic activity. Such an outcome may increase market speculation about potential policy easing at the Fed’s January meeting.
Conversely, a resilient labour market with solid job gains and steady wage growth would support the Fed’s cautious stance and reduce the urgency for further rate cuts. For currency markets, the implications are clear. Signs of labour market weakness could drag the US dollar lower, creating a supportive backdrop for risk-sensitive currency pairs. On the other hand, strong employment data would likely underpin the Greenback by reinforcing expectations that interest rates will remain unchanged for longer.
As markets digest the Fed’s latest decision, the upcoming labour data will be critical in shaping near-term expectations, setting the tone for currency and bond markets in the weeks ahead.
Expected Ranges
- NZD/USD: 0.5700 - 0.5900 ▼
- NZD/EUR: 0.4800 - 0.5000 ▼
- GBP/NZD: 2.3000 - 2.3200 ▲
- NZD/AUD: 1.1400 - 1.1600 ▼
- NZD/CAD: 0.7850 - 0.8050 ▼