The New Zealand Dollar (NZD) started the week strong against the US Dollar (USD), thanks to positive economic data from China. However, concerns about new tariffs announced by Donald Trump may limit further gains, affecting market stability. NZD/USD was around 0.5780, showing a 0.50% increase for the day. China’s latest report showed a GDP growth of 4.5% Year-on-Year in the fourth quarter, beating expectations. This growth was supported by strong exports, which helped offset some weakness in domestic demand.

Industrial Production and Retail Challenges

China’s Industrial Production grew by 5.2% annually, but Retail Sales fell due to issues in the property sector, affecting consumer spending. Despite some positive signs, antipodean currencies have faced limited gains, influenced by global risk aversion. The Reserve Bank of New Zealand (RBNZ) continues to maintain a strict policy, providing some support to the currency. Meanwhile, the USD weakened after Trump’s announcement of possible tariffs on European countries related to tensions over Greenland. This uncertainty has reduced the Greenback’s appeal as a safe-haven asset, keeping the NZD/USD exchange rate above the mid-0.5700s. The New Zealand Dollar showed the strongest performance against the US Dollar, with a daily change of -0.33%. In 2025, the Kiwi recovered against the dollar due to solid data from China and fears of new US tariffs on Europe. Back then, NZD/USD struggled around the 0.5780 level, creating short-term trading opportunities amidst uncertainty.

Current Economic Landscape

As of January 19, 2026, the situation has changed, with NZD/USD trading significantly higher, around 0.6250. The specific tariff threats from last year are no longer a top concern. The main factor now is the clear policy divide between the RBNZ and the US Federal Reserve. China’s economy remains important, just like in 2025. Recent data indicates China’s GDP grew by 5.2% in the last quarter of 2025, an improvement from the earlier 4.5% growth. This ongoing demand for commodities supports the value of the Kiwi dollar. The RBNZ has kept its cash rate at 5.5% to combat stubborn domestic inflation, which is at 3.8%. In contrast, US inflation has cooled to 2.8%, leading the Federal Reserve to hint at lowering interest rates. This growing interest rate gap makes holding the New Zealand dollar more appealing. This situation creates a clearer trading environment, although it’s not without risks. Traders may want to consider buying call options on the NZD/USD to benefit from potential gains while limiting their losses. However, the primary risk is an unexpected slowdown in New Zealand’s economy that could prompt the RBNZ to change its approach. In the upcoming weeks, we will closely monitor US inflation and job data, which will impact the Fed’s decisions about rate cuts. Any signs of weaker economic performance in New Zealand could also challenge the RBNZ’s firm stance. These data points will be key drivers of market volatility. Create your live VT Markets account and start trading now.

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