NZD/USD attracts some sellers to below 0.6100 ahead of US NFP data
- NZD/USD weakens to around 0.6070 in Thursday’s early European session, losing 0.30% on the day.
- China's services activity expanded at the slowest pace in nine months in June.
- All eyes will be on the US June employment data, which will be released later on Thursday.
The NZD/USD pair attracts some sellers to around 0.6070 during the early European session on Thursday. The New Zealand Dollar (NZD) edges lower against the Greenback as China's services activity growth hits a nine-month low in June. Traders will take more cues from the US June employment data, which will be published later on Thursday.
China’s Caixin/S&P Global Services Purchasing Managers' Index (PMI) fell to 50.6 in June from 51.1 in May, marking the weakest expansion since September 2024. This figure came in lower than the market consensus of 51.0.
The soft Chinese Services PMI data, along with deepening deflationary pressures and a persistent property crisis continued to undercut demand and growth in the world's second-largest economy. This, in turn, could undermine the China-proxy Kiwi as China is a major trading partner for New Zealand.
On the other hand, rising expectations of the US Federal Reserve (Fed) interest rate cut might weigh on the US Dollar (USD) and help limit the pair’s losses. Fed Chair Jerome Powell said on Tuesday that he would not rule out a potential interest rate cut at this month's meeting, adding that everything depends on incoming data. Goldman Sachs analysts on Monday raised their forecast for US interest rates in 2025 to three-quarter-point reductions due to muted tariff effects and labor market weakness.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.