New Zealand’s electronic card retail sales dropped from 1.6% to -1% in December compared to the same month last year. This indicates a decrease in consumer spending. The AUD/USD rose after reports showed that Australian employment data could lead to stricter monetary policy from the RBA. On the other hand, GBP/USD stayed steady above 1.3400 as traders waited for US economic data.

Market Movements

Gold prices fell below $4,800 as tariff threats reduced and a deal in Greenland was revealed. Additionally, Monero (XMR) declined about 38% from its recent high, continuing its downward trend. EUR/USD slipped below 1.1700 after renewed buying of the US dollar. Traders are closely monitoring upcoming US labour market reports, GDP figures, and PCE data. On Wednesday, many asset classes, including stocks and bonds, saw a rise. The crypto market rebounded along with crude oil, while gold initially surged but then stabilized. The decline in New Zealand’s retail sales to -1.0% is a serious red flag for the economy. It indicates that consumers are holding back on spending, which could challenge the recent strength of the NZD/USD. We think this upward trend, fueled by global sentiment, may not last as local economic conditions weaken.

Economic Challenges and Opportunities

This weak data puts the Reserve Bank of New Zealand in a difficult position, especially considering the high inflation rates from 2025. With consumer spending now decreasing, more interest rate hikes seem unlikely, which may negatively impact the Kiwi dollar. Data from Statistics New Zealand shows that the annual inflation rate finished 2025 at 4.5%, well above the target, adding to the bank’s policy challenges. In contrast, Australia’s economy is showing strength, with unemployment falling to 4.1%. This good news, along with stable prices for key exports like iron ore, gives the Reserve Bank of Australia cause to stay hawkish. The differences between the two economies make a strong case for traders to consider selling the New Zealand dollar against the Australian dollar in the coming weeks. Gold’s drop from its record high near $4,888 is mainly due to reduced geopolitical tensions. However, with last year’s inflation scare still fresh in mind, this pullback might present a buying opportunity if support holds. Any renewed uncertainty in the market will likely drive investors back to the safety of precious metals. Overall, the market appears to be shifting its focus from global news to domestic economic data. The upcoming US GDP and PCE inflation reports will be crucial for influencing the US Dollar and overall market risk. We are preparing for renewed weakness in the NZD and using options to safeguard against any sudden changes in market sentiment. Create your live VT Markets account and start trading now.

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