The NZD/USD pair fell to about 0.6080 during the Asian trading hours on Thursday. This drop happened after disappointing economic data came from China, New Zealand’s key trading partner. The Services Purchasing Managers Index (PMI) in China slipped to 50.6 in June from 51.1 in May, missing the expected 51.0. The Reserve Bank of New Zealand will keep its interest rate steady during its July meeting, having already lowered rates by 225 basis points to 3.25%. The bank considers the current rates neutral and is evaluating the impact of the prior cuts.

Weaker US Job Reports

In the US, weak job reports have raised expectations for a Federal Reserve rate cut this year. Futures markets suggest there’s almost a one-in-four chance of a cut by the July meeting, which could impact the USD and possibly help the NZD/USD. The New Zealand Dollar responds to its economy’s health, central bank policies, China’s economic performance, and dairy prices, its leading export. It typically strengthens in stable markets and weakens during uncertain times, affecting its overall value. With the NZD/USD pair down around 0.6080, it’s clear that the latest Chinese data disappointed investors. The Services PMI from China dropped to 50.6, which seems minor, but it fell short of expectations for 51.0 and followed a previous month’s 51.1. This is concerning, especially since the number is just above the crucial 50 mark—anything below that indicates contraction. Given China’s substantial role in supporting demand for New Zealand’s exports, these worries are valid. Orr and his team plan to keep the Official Cash Rate at 3.25% this month. After reducing rates by a significant 225 basis points recently, they want to see how these changes affect the economy. They describe the current conditions as ‘neutral’, meaning they believe interest rates aren’t boosting growth or slowing it down. For now, it’s about being patient and watching how things develop. In the US, Powell faces similar challenges. A weaker-than-expected labor report increases the chances of a Federal Reserve cut this year. Futures suggest a roughly 25% chance that a cut could happen as soon as July. If this sentiment grows and US Treasury yields decline, the Dollar may weaken, providing some opportunity for the New Zealand Dollar.

Impact Of Global Demand On NZD

More factors affect the NZD than just central bank policies. The NZD tends to fluctuate with market stability and global demand, especially from China. When confidence dips—whether due to weaker growth in China or general market concerns—its value often drops. Dairy is a strong export, but this sector also faces pricing pressures and slowing consumption in Asia. Traders should pay close attention not just to major indicators but also to trading volumes in dairy futures and changes in China’s commodity demand. As rate differences diminish in the coming days, we may see tighter price movements. However, if either central bank makes unexpected policy comments or if new data shifts consensus, price movements could extend beyond recent ranges. This isn’t a time for certain directions, but rather for being careful and prepared. Keeping stops accurately set against portfolio adjustments may be wise, especially since liquidity can thin at certain times, increasing the risk of volatility at inopportune moments. Create your live VT Markets account and start trading now.

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