NZD/USD attempts modest rebound but upside remains limited amid risk-off sentiment
Written by
Daily Currency Update
The New Zealand dollar (NZD) edged higher against its U.S. counterpart on Friday, recovering slightly from earlier lows not seen since April 11. The NZD/USD pair climbed to the 0.5770 region in late Asian trading, snapping a three-day losing streak. However, the rebound appears modest, and upside momentum remains constrained by persistent macroeconomic and geopolitical headwinds. The Kiwi's recovery comes after spot prices briefly dipped to multi-month lows during the Asian session, pressured by a combination of global risk aversion and diverging monetary policy expectations. While the pair has managed to regain a few pips, analysts caution that the broader trend remains bearish in the absence of a significant shift in market sentiment. A key factor weighing on the NZD/USD outlook is the prevailing cautious tone across global equity markets. Heightened geopolitical uncertainty—exacerbated by former U.S. President Donald Trump's recent pledge to impose a sweeping 100% tariff on a wide range of imported goods if re-elected—has dampened investor appetite for risk-sensitive assets. The U.S. dollar, benefiting from its safe-haven appeal, continues to attract inflows amid the uncertainty, placing further pressure on the Kiwi. Meanwhile, expectations of further interest rate cuts from the Reserve Bank of New Zealand (RBNZ) add another layer of vulnerability for the NZD. Despite recent signs of stabilization in domestic data, markets are increasingly pricing in additional monetary easing in the coming months as the RBNZ seeks to support a slowing economy and tame persistent disinflationary pressures. Taken together, the combination of global risk aversion, a firming U.S. dollar, and dovish RBNZ expectations suggests that any recovery in NZD/USD may remain short-lived unless sentiment shifts meaningfully or key data surprises to the upside. Traders will be closely watching upcoming economic releases from both countries, as well as central bank commentary and geopolitical developments, for further cues on the pair’s direction.Key Movers
Annual inflation in the United States, as measured by the Personal Consumption Expenditures (PCE) Price Index, rose slightly to 2.7% in August from 2.6% in July, according to data released Friday by the Bureau of Economic Analysis (BEA). The reading was in line with market expectations and signals continued, albeit gradual, progress toward the Federal Reserve's 2% inflation target. The core PCE Price Index—which excludes the more volatile food and energy components—held steady at 2.9% year-over-year, matching both July’s figure and economists' forecasts. On a monthly basis, the headline PCE Index rose 0.3%, while the core measure increased by 0.2%, reinforcing the view that inflation pressures remain persistent but are not accelerating. The report also highlighted resilient consumer activity. Personal Income rose by 0.4% in August, while Personal Spending climbed by a stronger-than-expected 0.6%, indicating that American households continue to support economic growth despite higher interest rates and lingering cost-of-living concerns. The PCE Price Index is the Federal Reserve’s preferred measure of inflation, and Friday’s data will be closely watched ahead of the next policy meeting. While the figures are unlikely to shift expectations for near-term interest rate moves, they may influence the Fed's tone on inflation persistence and the timing of future policy adjustments.Expected Ranges
- NZD/USD: 0.5700 - 0.5900 ▼
- NZD/EUR: 0.4800 - 0.5000 ▼
- GBP/NZD: 2.3100 - 2.3300 ▲
- NZD/AUD: 1.1200 - 1.1400 ▼
- NZD/CAD: 0.7950 - 0.8150 ▼