The NZD/USD pair extended its decline to around 0.5615 during the early Asian session on Friday. The New Zealand Dollar (NZD) faces continued pressure, driven by concerns over weak consumer demand and a prolonged downturn in China’s property market. Trading activity is expected to remain subdued ahead of the New Year holiday.
Data released on Friday showed that China’s industrial profits declined for the fourth consecutive month, falling 7.3% in November compared to the previous year. Persistently weak domestic demand in China, New Zealand’s largest trading partner, is likely to weigh on the NZD, which is often seen as a proxy for the Chinese economy.
Adding to the NZD’s downside pressure is speculation about a potential 10% tariff on Chinese goods under the Trump administration. Analysts suggest that such a move could push inflation higher, prompting the US Federal Reserve to adopt a more cautious stance on interest rates next year. This could strengthen the US Dollar, further hindering the NZD/USD pair.
Markets are also pricing in further interest rate cuts from the Reserve Bank of New Zealand (RBNZ) to stimulate economic growth, especially after New Zealand entered a recession in the third quarter (Q3). A 50 basis point rate cut in February is now seen as a 70% probability, with rates expected to decline to 3.0% by the end of 2025.
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