New Zealand dollar lifts as China inflation rebounds and trade sentiment improves
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Daily Currency Update
The New Zealand dollar strengthened against the US dollar on Monday, with the NZD/USD pair trading around US$0.5645, up about 0.18% on the day, at the time of writing. The Kiwi found support after sliding to a seven-month low of US$0.5605 last week, helped by encouraging signs from China’s latest inflation data and a slight easing in trade tensions between Beijing and Washington. Fresh figures released on Monday showed that China’s Consumer Price Index (CPI) rose by 0.2% year-on-year in October, reversing a 0.3% decline in September and surpassing market expectations for no change.Meanwhile, the Producer Price Index (PPI) fell 2.1%, a smaller drop than anticipated, signalling that price pressures in the world’s second-largest economy may be stabilising. The data offered some relief to investors who have been concerned about deflation risks and sluggish domestic demand in China, New Zealand’s largest trading partner. A recovery in Chinese consumption could translate into stronger demand for New Zealand’s key exports, such as dairy and meat, providing a tailwind for the NZD.
Sentiment was also buoyed by signs of a modest thaw in US-China trade relations, after reports suggested that both sides are exploring ways to improve dialogue on economic and technology issues. Any progress on this front tends to support risk-sensitive currencies like the New Zealand dollar, which often benefit when global trade prospects improve.
On the US side, the US dollar softened slightly as investors turned cautious ahead of key inflation and labour market data due later in the week. Expectations that the Federal Reserve may begin easing policy next year have also weighed on the greenback, offering additional support to the NZD/USD pair. From a technical standpoint, initial resistance for NZD/USD is seen near US$0.5660, followed by US$0.5690, while support lies at US$0.5610 and the recent low of US$0.5605.
A sustained move above current levels could signal that the Kiwi is attempting to build a short-term recovery after weeks of pressure. Overall, the NZD’s rebound reflects a combination of improving sentiment toward China, softer USD momentum and investor optimism that global demand may be stabilising as year-end approaches.
Key Movers
The US Dollar Index (DXY) traded slightly higher around 99.65 during Asian hours on Monday, extending a cautious rebound as investors grew more optimistic that the ongoing US government shutdown could be resolved soon. The index’s modest gains came even as markets grappled with mounting uncertainty surrounding the country’s economic data blackout, now stretching into its second month.The US dollar’s performance has been caught between improving sentiment over a potential budget breakthrough and growing anxiety about the absence of key economic indicators. The latest blow came with news that the November Non-Farm Payrolls (NFP) report has been cancelled once again due to the government shutdown. The cancellation marks the second consecutive month without an official employment report, one of the most closely watched gauges of economic health and a vital input for the Federal Reserve’s policy decisions.
Without access to official data, traders and analysts have been relying on private-sector surveys such as ADP’s employment report, ISM business indices and various labour market trackers to estimate the economy’s performance. However, these substitutes lack the credibility, comprehensiveness and market-moving impact of government releases. The resulting information gap has deepened the sense of uncertainty in financial markets, leaving participants hesitant to take strong directional positions on the US dollar.
Meanwhile, expectations for the Federal Reserve’s next policy steps remain fluid. Some investors believe the extended data blackout could prompt the Fed to adopt a more cautious stance in upcoming meetings, emphasising flexibility until official figures resume. Others argue that signs of resilient private hiring and steady consumer activity may encourage policymakers to maintain their current restrictive bias a bit longer.
Broader sentiment in currency markets also remain influenced by developments in Washington. If negotiations to end the shutdown show tangible progress, the DXY could find additional near-term support, as reduced political risk often helps underpin the US dollar. Conversely, prolonged stalemates could weigh on investor confidence and renew downward pressure.
In the short term, traders are watching technical levels near 99.80 as initial resistance and 99.30 as immediate support. Until clarity returns on both fiscal negotiations and official data releases, the US dollar’s path is likely to remain range-bound and sentiment-driven, with volatility spikes tied closely to news headlines out of Washington.
Expected Ranges
- NZD/USD: 0.5550 - 0.5750 ▲
- NZD/EUR: 0.4800 - 0.5000 ▲
- GBP/NZD: 2.3250 - 2.3450 ▼
- NZD/AUD: 1.1450 - 1.1650 ▼
- NZD/CAD: 0.7800 - 0.8000 ▲