As we head into the beginning of the week, the NZD/USD currency pair has gained some bullish traction. This increase is fueled by the recent unveiling of New Zealand’s consumer inflation figures. Please note that despite this positive movement, the pair still has stayed strong below the mid-0.5700s during the entire Asian trading session. Buoyant macroeconomic releases out of China—which particularly beat expectations on the production front—have provided a lift to the New Zealand dollar (Kiwi). At the same time, a modest US dollar weakness has provided an overall positive for its expansion.
In July-Sept, New Zealand’s consumer inflation jumped to 3.0%. This increase from 2.7% in Q2 is in line with the consensus estimates. The recent uptick in inflation is a sign that New Zealand’s economy is on the upswing. This positive change has increased traders’ trust in the Kiwi. Analysts now predict the US Federal Reserve will lower borrowing costs two additional times this year. This move will add further kiwi supportive impetus for the NZD/USD pair.
This positive sentiment around the NZD/USD is reinforced by supportive Chinese economic data. China’s Gross Domestic Product (GDP), released by the National Bureau of Statistics of China on a quarterly basis, showed an actual growth of 1.1%, surpassing the consensus estimate of 0.8% and remaining steady from the previous quarter’s growth rate of 1.1%. This surprisingly dovish GDP performance has given a boost to antipodean currencies such as the Kiwi.
US President Donald Trump’s positive comments on Friday helped allay fears over US-China trade tensions. Large-scale tariffs on China would be “unsustainable,” Trump said. His remarks soothed fears that the current trade fracas might escalate into something much more serious. This drop in uncertainty has offered further support for the NZD/USD and sterling.
The NZD/USD pair still faces heavy burdens despite all of the good news. It fails to capitalize on Friday’s paltry US dollar gains. Traders are still on the lookout, perhaps preferring to wait for US consumer inflation numbers due Friday. All eyes will be on these figures, as they may affect the Federal Reserve’s decisions on future monetary policy.
In addition, worries over a potentially lengthy US government shutdown may weigh on the US macroeconomic outlook. In any case, such uncertainty would not be conducive to a strong USD. Consequently, investors may turn to the NZD/USD pair, looking for safety in currencies that are considered healthier or more lucrative.