The NZD/USD pair has bounced back to about 0.5740 during Monday’s Asian session, as traders remain hopeful for a resolution in the US-China trade war. US President Donald Trump first threatened to impose more tariffs on Chinese imports but later eased his position. This reduction in tensions is positive for the New Zealand Dollar since China is a key trading partner.

Impact of US Government Shutdown

The US government shutdown has entered its third week and could affect the US Dollar, benefiting the NZD/USD pair. No Senate votes on funding are expected until Tuesday, which prolongs the situation. The Reserve Bank of New Zealand (RBNZ) holds a cautious outlook, which could impact the NZD. They recently lowered their benchmark rate by 50 basis points and may do so again. The New Zealand Dollar is shaped by several factors, including the economy’s health, central bank policies, and trading relationships. Dairy prices also matter because they are a significant export for New Zealand. Economic data releases help establish the value of the New Zealand Dollar. Positive outcomes can draw foreign investors and lead to higher interest rates.

Broader Market Sentiment

General market sentiment affects the NZD, causing it to rise during stable times. However, economic uncertainty can weaken the currency. As of October 13, 2025, the NZD/USD pair is trading around 0.6120, painting a different picture than during the Trump administration. Back then, the focus was on a possible trade war compromise, with the kiwi around 0.5750. Now, the situation has shifted from overall tariffs to more targeted competition in technology and strategic resources. The US-China relationship is still vital, but the tone has changed from abrupt tariff threats. Current discussions revolve around managing economic ties, especially concerning semiconductor supply chains and green technology. This creates a more complex and less news-driven environment for the kiwi, which remains a proxy for the health of the Chinese economy. The Reserve Bank of New Zealand’s approach is drastically different from their past dovish stance. In the past, markets anticipated rate cuts to a benchmark of 2.25%. Now, the RBNZ is keeping its Official Cash Rate at 4.75% to fight ongoing inflation. New Zealand’s recent CPI data from September 2025 shows inflation at 3.4%, indicating that rates will likely stay higher for a while, which supports the NZD. On the US side, the Federal Reserve also keeps its funds rate around 5.0%, waiting for clear signs that inflation is returning to its 2% target. This small rate difference between the US and New Zealand means carry trades are less influential than before. Traders are closely monitoring unemployment and wage growth figures from both countries for signs of economic divergence. China’s economic performance, important for the New Zealand dollar, sends mixed signals. China’s Q3 2025 GDP growth was reported at 4.8%, slightly under expectations, but recent Global Dairy Trade auctions showed a 2.1% price rise. This indicates that while general sentiment about China may be cautious, New Zealand’s main export is demonstrating some strength. Given this context, derivative traders should think about strategies to manage potential volatility rather than seeking a clear trend. The combined influences of a hawkish RBNZ and worries about global growth create a delicate balance. Using options to define risk, such as buying straddles to prepare for a possible breakout in either direction, may be wiser than committing to an outright long or short position in the near future. Create your live VT Markets account and start trading now.

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