New Zealand dollar holds ground above US$0.59 as risk sentiment steadies

Daily Currency Update

Overnight, the New Zealand dollar (NZD) traded within a relatively narrow range, but maintained the gains it secured late last week, stabilising just above US$0.5900. This followed a sharp 1.2% rally on Friday, sparked by weaker-than-expected U.S. nonfarm payroll data that raised concerns about a potential economic slowdown in the United States.

The disappointing jobs report heightened market expectations for a Federal Reserve rate cut as early as September, weighing on the US dollar and supporting risk-sensitive currencies like the Kiwi. However, overnight momentum in NZD/USD cooled as investors grew cautious ahead of key upcoming global events, including U.S.–China trade talks and important Chinese economic data releases, both critical given New Zealand’s strong trade ties with China.

With limited domestic data to influence trading, market focus remained firmly on external factors, keeping the Kiwi capped just below resistance near US$0.5925. In the short term, the NZD retains moderate support, but persistent global uncertainties continue to limit its upside potential. Looking ahead, the outlook for the NZD remains broadly bearish in the near term, largely due to expectations of further interest rate cuts from the Reserve Bank of New Zealand (RBNZ).

Since August 2024, the RBNZ has cut rates by 175–225 basis points and, despite holding the cash rate steady at 3.25% in July, has signalled that additional easing may be forthcoming—potentially lowering rates to 2.75% or even 2.5% by year-end if inflation remains subdued and trade tensions persist.

With inflation moderating and global trade uncertainties weighing heavily on growth prospects, analysts, including ANZ, forecast that NZD/USD could decline to around US$0.55 by mid-2025.