- NZD/USD faces challenges as concerns over weakening oil demand rise amid decreasing odds of Fed rate cuts.
- The US NFP showed 147,000 new jobs added, while the Unemployment Rate declined to 4.1% in June.
- The RBNZ is widely anticipated to hold its cash rate steady at 3.25% next week.
NZD/USD remains subdued for the third successive session, trading around 0.6070 during the Asian hours on Friday. The pair depreciated as the US Dollar (USD) received support from stronger-than-expected US job growth and a surprise drop in the unemployment rate data, overshadowing investors’ hopes for a Federal Reserve (Fed) interest rate cut.
Traders also await clarity on US President Donald Trump’s plans for tariffs on various countries. Trump said late Thursday that he “will begin sending letters on trade tariffs starting Friday.” He told reporters that he would send letters to 10 countries at a time, laying out tariff rates of 20% to 30%, per Reuters.
The US Nonfarm Payrolls (NFP) report took the spotlight on Thursday, landing in a shortened trading week due to US Independence Day. However, markets seem more attuned to the broader trend, as political and fiscal uncertainties continue to weigh on investor sentiment.
NFP indicated that the US labor force grew by 147,000 jobs, surpassing the anticipated 110,000 in June. Additionally, the Unemployment Rate declined to 4.1% from 4.2%. Meanwhile, weekly Jobless Claims fell to 233,000, down from 237,000, reflecting a resilient US labor market.
US President Donald Trump’s “one, big, beautiful” tax bill passed the House of Representatives and was sent to him for signing into law. The legislation includes significant tax cuts designed to stimulate economic growth. Trump hailed the bill’s passage on Truth Social, calling it a “historic victory for American workers, families, and businesses.”
The Reserve Bank of New Zealand (RBNZ) is widely expected to hold its cash rate steady at 3.25% next week. However, investors continue to anticipate one or two additional 25 basis point cuts later this year, amid ongoing concerns about the economic impact of US tariffs.
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.
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