The NZD/USD pair saw some buying interest on Monday, recovering from a four-day losing streak and climbing to around 0.5775 during the Asian trading hours. Market attention now turns to the preliminary US December Purchasing Managers Index (PMI), scheduled for release later on Monday, which is expected to provide fresh market direction.
Mixed Economic Data from China Supports NZD
Chinese economic data released on Monday showed mixed results. Industrial Production rose by 5.4% year-on-year (YoY) in November, surpassing October’s 5.3% and market expectations of 5.3%. However, Retail Sales growth slowed, increasing by only 3.0% YoY, well below the 4.8% rise seen in October and below the market consensus of 4.6%. Despite the weaker retail data, the New Zealand Dollar (NZD) held firm in reaction to the positive industrial production figures.
Additionally, China announced plans to increase its fiscal deficit to boost consumption in 2025, a move that could support the Chinese economy. Given that China is a key trading partner for New Zealand, these policies may provide a favorable outlook for the NZD in the medium term.
US Federal Reserve’s December Meeting Likely to Impact USD
On the US Dollar (USD) front, the market is also watching for a potential hawkish rate cut by the Federal Reserve (Fed) at its December meeting, which is set for Wednesday. The Fed is expected to lower interest rates by 25 basis points, though the outlook remains cautious as the US economy continues to show signs of strength. Investors are also awaiting the Fed’s updated economic projections, which will provide further clarity on future policy moves.
The combination of these factors could result in continued headwinds for NZD/USD if the Fed’s policy decision strengthens the USD.
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