New Zealand dollar edges lower amid labour market softness and trade uncertainty
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Daily Currency Update
Overnight, the New Zealand dollar (NZD) weakened slightly against the US dollar (USD), declining by around 0.13% to settle near US $0.5960 by the close of trading. The NZD moved within a relatively narrow range, hitting a high of approximately US$0.5973 and a low of US$0.5939. This mild pullback followed a notable rally earlier in the week, which had been driven by softer-than-expected US payroll data and growing market speculation that the Federal Reserve is moving closer to rate cuts, which temporarily supported the NZD. However, momentum faded overnight as traders turned more cautious ahead of upcoming US/China trade discussions and key Chinese economic data, both of which hold significant importance for New Zealand given its deep trade ties with China.On the domestic front, sentiment around the NZD was further dampened by fresh labour market data from Statistics New Zealand, which showed that the unemployment rate rose to 5.2% in Q2, slightly above expectations. The report pointed to ongoing softness in the job market, with sluggish wage growth and declining employment levels reinforcing concerns about weakening domestic demand. As a result, market expectations for a 25-basis-point rate cut by the Reserve Bank of New Zealand (RBNZ) in its upcoming August meeting strengthened significantly, with current pricing reflecting an 88% probability of easing. Overall, while the NZD held relatively steady overnight in the absence of major new catalysts, the tone remains cautiously bearish. A combination of fragile domestic fundamentals, China-linked external uncertainties, and diverging central bank expectations continues to weigh on the near-term outlook for the NZD.
Key Movers
Overnight, the US Dollar Index (DXY) experienced a modest decline, slipping by approximately 0.07% as market participants adopted a cautious stance amid growing concerns about the US economic outlook. The slight pullback reflected mounting worries over the risk of stagflation, with recent data pointing to stagnant activity in the services sector alongside rising input costs, driven in part by ongoing tariff pressures. Adding to the uncertainty, investors awaited President Trump’s decision on a replacement for an upcoming vacancy on the Federal Reserve’s Board of Governors, a move that could influence the central bank’s future policy direction. Despite these headwinds, the US dollar remained relatively stable, supported by persistent expectations of Federal Reserve easing, with markets currently pricing in an 86.5% probability of a rate cut in September. Overall, the DXY’s subdued overnight performance signals that investors are digesting a complex mix of economic data and policy signals, maintaining a cautious approach as they await clearer direction on US monetary policy. Overnight, US stocks posted solid gains as investor sentiment was buoyed by a combination of strong corporate news and growing expectations of Federal Reserve easing. The S&P 500 advanced by 0.7%, closing at 6,345.06, supported notably by Apple’s announcement of a substantial $100 billion investment plan in the US over the next four years. This bold move boosted confidence in the technology sector and the broader market. The Nasdaq Composite outperformed with a 1.2% gain, closing at 21,169.42, driven largely by a 5.75% surge in Apple’s stock price, which helped lift tech shares across the board. Meanwhile, the Dow Jones Industrial Average rose a more modest 0.2%, finishing at 44,193.12, reflecting mixed performances among industrial and blue-chip stocks. The Russell 2000 index, which tracks small-cap stocks, slipped slightly by 0.2%, indicating some caution among investors in smaller companies amid ongoing macroeconomic uncertainties.Expected Ranges
- NZD/USD: 0.5800 - 0.6000 ▼
- NZD/EUR: 0.5000 - 0.5200 ▼
- GBP/NZD: 2.2400 - 2.2600 ▲
- NZD/AUD: 1.0850 - 1.1050 ▼
- NZD/CAD: 0.8100 - 0.8300 ▲