- NZD/USD continuesi ts downward trend, slipping to approximately 0.5805 during early European trading on Monday, marking a 0.47% decline for the day.
- Concerns over deflationary pressures in China, coupled with renewed tariff threats from former President Trump, weigh on the China-linked New Zealand Dollar.
- Market focus now shifts to the upcoming US CPI inflation report, set for release on Wednesday.
The NZD/USD pair faces downward pressure, trading near 0.5805 during Monday’s early European session. A stronger US Dollar (USD) and weak Chinese consumer inflation weigh on the pair. Traders are now looking ahead to the US Consumer Price Index (CPI) report for November, scheduled for release on Wednesday, for further direction.
China’s CPI fell to a five-month low in November, signaling limited impact from Beijing’s recent economic support measures. This has negatively affected the New Zealand Dollar (NZD), given New Zealand’s close trade ties with China.
Adding to the pressure, potential new tariffs under US President-elect Donald Trump could pose additional challenges for the NZD/USD pair. On Monday, Fitch Ratings revised its forecast for China’s 2025 economic growth to 4.3% from 4.5%, citing risks associated with increased US tariffs.
On the USD front, Federal Reserve (Fed) officials appear set to lower interest rates in December after recent data indicated that while the US labor market remained resilient, it showed signs of cooling in November. According to the CME Group’s FedWatch Tool, markets are pricing in an 85.1% probability of a 25-basis-point rate cut this month.
Despite the expected rate cut, analysts suggest the US Dollar may face some profit-taking after its recent rally, potentially limiting further declines in NZD/USD. Market participants will closely monitor Wednesday’s US inflation data for new insights.
“The inflation data could determine whether the Fed opts for a ‘hawkish cut,’ potentially supporting the USD if policymakers signal a pause in rate cuts heading into early 2025,” said IG market strategist Yeap Jun Rong.
