The NZD/USD pair is rising thanks to better-than-expected trade data from China. The New Zealand Dollar is gaining support from improved risk appetite linked to the Chinese economy, but a strong US Dollar prevents it from climbing higher. China’s trade surplus increased to $114.1 billion in December, which is more than expected. Exports went up by 6.6% compared to last year, and imports rose by 5.7%, indicating a recovery in domestic demand. This news is beneficial for currencies sensitive to growth, including the New Zealand Dollar.

Impact of New Zealand Data

In New Zealand, building permits increased by 2.8% in November, suggesting some stability in housing, but this has little effect on the Kiwi. The strong US Dollar, backed by solid US economic data, continues to weigh on NZD/USD. In the US, November’s Producer Price Index climbed by 3% year-on-year, and retail sales grew by 0.6% month-on-month. Federal Reserve officials are taking a cautious stance on monetary policy, which helps maintain the strength of the US Dollar. Despite the strong US Dollar, positive signals from China are keeping the NZD/USD afloat. Today, the NZD is performing best against the Australian Dollar among major currencies, as shown on a currency heat map. The strong Chinese trade data at the end of 2025 is still supporting the NZD/USD. China’s record trade surplus showed that their economy is handling US tariffs well, which is good news for New Zealand. This is why the pair has found reliable support near the 0.5750 level.

Economic Tug of War

Nonetheless, the strength of the US Dollar is the main factor limiting any big price increases. Following the strong US Producer Price Index and retail sales data from November, December’s US Consumer Price Index (CPI) rose slightly to 3.2% year-on-year. This raises market expectations for the Federal Reserve to hold off on rate cuts, keeping the Dollar strong. Looking at more recent data, China’s official manufacturing PMI for January cooled slightly to 50.5, down from December, but remains in expansionary territory. This suggests that the strong momentum supporting the Kiwi last month may be slowing down. Traders should be aware that the positive effects from China’s data might be fading. This tug-of-war creates a scenario where range-trading strategies could work well. With conflicting signals, implied volatility on NZD/USD options is increasing, making strategies like selling strangles outside of the recent 0.5700-0.5850 range appealing for collecting premiums. Traders should stay cautious ahead of the next Federal Reserve meeting, as any shift in tone could lead to a breakout. We are also monitoring the NZD/AUD exchange rate, where the Kiwi has displayed relative strength. With Australia’s inflation data declining faster than New Zealand’s in the fourth quarter of 2025, the Reserve Bank of New Zealand may be viewed as more hawkish. This situation is similar to the central bank policy differences that influenced markets in 2022 and 2023. Create your live VT Markets account and start trading now.

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