The NZD/USD pair begins the new week on a positive note, recovering from a four-day losing streak that saw the currency pair hit its lowest level since October 2022. Trading around the 0.5565 level, the pair shows modest intraday gains, despite the release of China’s December Trade Balance data.
China’s trade surplus widened to CNY752.91 billion in December, up from CNY692.8 billion in November, driven by a strong 10.9% year-on-year (YoY) jump in exports. The country’s imports rose by 1.3% YoY in December, slightly above November’s 1.2%. Despite the positive trade data, market reaction has been subdued, reflecting concerns over China’s fragile economy, which limits significant gains for risk-sensitive currencies like the Kiwi.
Meanwhile, the US Dollar (USD) remains near its highest level in over two years, bolstered by expectations that the Federal Reserve (Fed) will pause its rate-cutting cycle later this month. This outlook was reinforced by Friday’s strong US Nonfarm Payrolls (NFP) report, which showed a rise of 256,000 jobs in December, surpassing both market expectations and November’s revised figure of 212,000. Additionally, the US Unemployment Rate unexpectedly dropped to 4.1% from 4.2%.
Geopolitical uncertainties, coupled with hawkish Fed expectations, continue to weigh on investor sentiment, driving flows into the safe-haven US Dollar and capping potential gains for the Kiwi. Furthermore, concerns over a more aggressive policy easing by the Reserve Bank of New Zealand (RBNZ) add further caution for the NZD/USD pair. As such, despite the modest recovery, it remains unclear whether the pair has reached a near-term bottom, and traders may hesitate to position for further gains.
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