The NZD/USD pair is struggling near 0.6055 in Friday’s early Asian session, weighed down by a stronger US Dollar (USD) and looming uncertainty ahead of critical Chinese economic data. Rising expectations for a moderate 25 basis point (bps) rate cut by the Federal Reserve (Fed) in November, combined with stronger-than-expected US economic data, have bolstered the Greenback, leaving the Kiwi under pressure.
Investors are now closely watching the release of China’s Gross Domestic Product (GDP), Retail Sales, and Industrial Production data, set to be released on Friday. As China is a key trading partner for New Zealand, any signs of slowing growth in the Chinese economy could spell trouble for the NZD, which often reacts as a proxy for Chinese economic health.
Recent US economic reports have been robust. September's Retail Sales rose beyond expectations, and August figures were also revised higher. At the same time, weekly Initial Jobless Claims unexpectedly dropped, fueling speculation that the Fed may take a more gradual approach to rate cuts, further supporting the USD against the Kiwi.
Meanwhile, inflation in New Zealand has eased, with Q3 YoY inflation falling to 2.2%, down from 3.3%. This is the first time in two years that inflation has returned within the Reserve Bank of New Zealand’s (RBNZ) 1% to 3% target range. With inflation moderating, market expectations are growing that the RBNZ may soon begin cutting interest rates, which would likely weigh on the NZD in the months ahead.
As traders brace for the Chinese data release, the NZD/USD is likely to remain volatile. Should China’s economic growth fall short of expectations, the Kiwi could face additional selling pressure, pushing the pair further below 0.6050.
