The NZD/USD pair fell to about 0.5765 during Thursday’s Asian session as traders eagerly awaited the US employment report set to release on Friday. The US Dollar gained strength as the market remained cautious, anticipating important economic data from the US. Economists predict that the US economy will add around 60,000 jobs in December, and the unemployment rate might drop to 4.5%. A strong report could boost the US Dollar, while weaker results may lead the Federal Reserve to ease its stance, putting pressure on the Greenback.

US Services Activity and Political Uncertainties

US services activity improved in December, with the ISM Services PMI rising to 54.4, surpassing the previous 52.6 and the forecast of 52.3. Meanwhile, political instability in Venezuela could impact riskier assets like the New Zealand Dollar, also known as the Kiwi. The Kiwi’s value is affected by New Zealand’s economic health and the policies of the Reserve Bank of New Zealand. Factors such as China’s economic performance and dairy prices also play a role. Economic data from New Zealand shapes the NZD by impacting perceptions of growth and inflation, which in turn influence investor interest and interest rate decisions. During periods of market confidence, the NZD usually strengthens; however, it tends to weaken during market downturns. In early 2025, the NZD/USD pair was under pressure near 0.5750 due to concerns about an upcoming US jobs report. This caution was justified, as the US Dollar remained strong throughout the year. Now, in January 2026, the pair is trading lower as the economic situation has become clearer. The US labor market has proved to be unexpectedly strong, contributing to the Dollar’s strength. The latest jobs report for December 2025 revealed the economy added 199,000 jobs, exceeding forecasts, while the unemployment rate stayed low at 3.7%. This data implies that the Federal Reserve may not feel urgent pressure to cut interest rates.

New Zealand Economic Headwinds

This strong employment situation is a stark contrast to the previous year when traders hoped for signs of weakness that would prompt the Fed to ease. A robust US economy suggests that interest rate differentials will continue to favor the US Dollar. Derivative traders should account for this ongoing Dollar strength in their strategies. On the flip side, New Zealand’s economy faces significant challenges. Although the Reserve Bank of New Zealand (RBNZ) has kept its interest rate at 5.50% for over a year to combat inflation, attention is now turning to how long it can sustain this high rate. The pressure of elevated rates is becoming more evident in the domestic economy. A major concern is the situation in China, New Zealand’s largest trading partner. Recent data shows China’s manufacturing PMI struggling to stay above the critical 50-point mark that indicates growth, suggesting a slow economic recovery. This directly impacts the demand for New Zealand’s exports, putting downward pressure on the Kiwi. While dairy prices have shown some modest recovery based on the latest Global Dairy Trade auction data, this improvement is not enough to counter the overall negative sentiment in the market. The Venezuelan political tensions that briefly impacted markets in early 2025 have eased, but broader concerns about global economic growth persist. With a strong US economy contrasting with New Zealand’s challenges, traders might consider strategies that capitalize on potential further weakness or sideways movement in the NZD/USD. Buying put options could help position for continued declines while managing risk. Selling call options at strike prices above recent highs may also be an option for those who believe the pair’s upside is limited. Create your live VT Markets account and start trading now.

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