The New Zealand Dollar (NZD) strengthened against the US Dollar (USD) on Friday, with the NZD/USD pair rising to around 0.5610 during the Asian trading session. The gain came on the back of stronger-than-expected economic data from China, as investors now await key US economic reports later in the day, including December’s Building Permits, Housing Starts, and Industrial Production.
China’s economy grew 5.4% year-on-year in the fourth quarter of 2024, exceeding the market’s expectation of 5% and reflecting the impact of stimulus measures that helped boost economic activity. On a quarterly basis, China’s GDP rose by 1.6% in Q4, matching expectations and marking an improvement over the 0.9% growth seen in Q3.
Additional economic indicators from China painted a positive picture. Retail Sales increased by 3.7% in December, surpassing the anticipated 3.0% rise, while Industrial Production surged 6.2%, exceeding forecasts of 5.4%. These upbeat figures bode well for the New Zealand Dollar, given China’s importance as New Zealand’s major trading partner.
US Fed‘s Dovish Signals Weigh on Greenback
The NZD also found support from the US Federal Reserve’s dovish stance, which is dampening demand for the US Dollar. On Thursday, Fed Governor Christopher Waller suggested that the central bank may reduce interest rates multiple times this year, should inflation continue to ease as expected.
Waller’s comments have led to heightened expectations of a more aggressive pace of rate cuts, with market-implied odds for a potential rate reduction in May rising to nearly 50%, according to CME Group data. This dovish outlook on US monetary policy has contributed to the USD’s weakness against the NZD.
As traders digest these developments, they will look to the upcoming US economic data for further direction on the outlook for the US Dollar and the broader market.
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