The NZD/USD currency pair is experiencing downward pressure, trading around 0.5600 during the Asian session. This decline marks the third consecutive session of losses for the New Zealand Dollar (NZD), primarily influenced by recent economic data from China. On Thursday, China’s Consumer Price Index (CPI) reported a 0.1% annual increase for December, a slight decline from November’s figure of 0.2%, aligning with market forecasts. Month-on-month, inflation remained stagnant at 0%, following a previous decrease of 0.6%.
The New Zealand Dollar faces additional challenges amidst expectations of significant monetary easing from the Reserve Bank of New Zealand (RBNZ). Analysts predict that the RBNZ will reduce its current cash rate of 4.25% by as much as 50 basis points in their upcoming February meeting, further weighing on the NZD.
Concurrently, the US Dollar (USD) continues to strengthen, supported by hawkish sentiments surrounding the Federal Reserve’s policy trajectory. The US Dollar Index is holding steady near 109.00, bolstered by recent robust labor market data. Initial jobless claims for the week ending January 3 fell to 201,000, surpassing the consensus estimate of 218,000. Meanwhile, the ADP Employment Change for December rose by 122,000, although it fell short of the expected 140,000.
Moreover, long-term US bond yields are on the rise, with the 10-year yield climbing to 4.73% and the 30-year approaching 4.96%. These gains are partly driven by heavy supply following insights from the Federal Open Market Committee’s (FOMC) December meeting minutes. Policymakers expressed concerns over inflation and the potential implications of political developments, opting for a more cautious approach regarding rate cuts, reducing their initial projections for 2025 from four cuts to two.
