NZD/USD dropped to around 0.5760, marking its sixth consecutive day of decline due to a stronger US Dollar. The pair has fallen from last week’s high of over 0.5850, hitting a daily low of 0.5763. The US Dollar gained strength after the release of the Federal Open Market Committee’s minutes, which reflected differing views among members about future interest rate cuts. While most supported a quarter-point cut in December, three members preferred to keep rates unchanged, indicating strong disagreement—this is the highest dissent seen since 2019.

Effect of Chinese Business Activity

Chinese business activity data did not ease the pressure on the New Zealand Dollar, even though China is New Zealand’s top trading partner. The manufacturing PMI in China went up by 0.9 points to 50.1, and the non-manufacturing PMI rose 0.7 points to 50.2, indicating slight growth. The value of the New Zealand Dollar closely relates to economic health and the central bank’s policy. Performance in China’s economy and dairy prices greatly affect the NZD due to trading links. Positive economic data typically supports the NZD, while poor figures can weaken it. The NZD tends to strengthen in calm markets, as it is seen as a commodity currency, but it often falls during turbulent times when investors seek safer options.

Further Decline in NZD/USD

With the NZD/USD pair falling to 0.5760, the US Dollar is expected to be a leading factor in the coming weeks. The Federal Reserve’s minutes from the December 10 meeting revealed considerable division, leading to uncertainty about upcoming rate cuts, which actually benefits the US Dollar. We need to closely monitor the reasons behind the Fed’s split decision, the most significant since 2019. The latest US inflation report for November 2025 showed core CPI stubbornly at 3.2%, well over the Fed’s target. This supports the dissenting officials who opposed the recent rate cut, indicating that the threshold for future easing remains high. In New Zealand, the Kiwi shows unusual weakness by not responding to positive news from China. December’s Chinese PMI figures, which indicated a return to growth, should have lifted the NZD but were overlooked. Additionally, prices at the recent Global Dairy Trade auction dropped by 1.2%, adding further pressure on New Zealand’s economy. For traders, this situation suggests a move toward predicting further NZD/USD weakness. Buying put options with strike prices below 0.5700 could be a smart strategy to take advantage of the current downward trend. The dollar’s strength is overshadowing local factors, so it’s wise to follow this trend until Fed signals change. Looking ahead, the upcoming US jobs report for December will be crucial. The market is attentive to how the “deteriorating labor market” mentioned in the Fed minutes behaves, especially after the last report showed only a modest payroll gain of 155,000. However, unless unemployment jumps dramatically, persistent inflation will likely keep the Fed cautious and support the dollar. It’s important to remember that the Reserve Bank of New Zealand also struggles with domestic inflation, which was high at 4.5% in the third quarter of 2025. While this might lead the RBNZ to remain hawkish, current market focus is on the Fed’s policy directions. At the moment, the narrative centers around US Dollar strength, making short NZD/USD positions a more sensible choice. Create your live VT Markets account and start trading now.

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