The NZD/USD pair ended a six-day losing streak, trading near 0.5600 during Monday’s Asian session. The New Zealand Dollar (NZD) found support as the US Dollar (USD) weakened following the release of January’s Personal Consumption Expenditures (PCE) inflation data, which aligned with expectations and eased fears of unexpected inflation spikes.
US Dollar Faces Pressure Despite Rising Yields
The US Dollar Index (DXY) declined after three consecutive days of gains, hovering around 107.30. However, the downside for the Greenback may be limited as US Treasury yields climbed, with the 2-year yield at 4.01% and the 10-year yield at 4.23%.
China’s Economic Data Boosts NZD
The Kiwi also gained support from positive economic data out of China, a key trading partner for New Zealand. China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) rose to 50.8 in February from 50.1, surpassing market expectations of 50.3. Official data released Saturday showed the NBS Manufacturing PMI improving to 50.2, exceeding the 49.9 forecast, while the NBS Non-Manufacturing PMI climbed to 50.4, beating expectations of 50.3.
Trade Tensions Pose Risks to NZD Upside
Despite the recent rebound, the NZD remains vulnerable to rising global trade tensions. Over the weekend, US President Donald Trump announced an additional 10% tariff on Chinese imports starting Tuesday, following last month’s similar increase. Additionally, Trump confirmed 25% tariffs on Canadian and Mexican goods will take effect on March 4, further stoking trade war concerns.
Outlook for NZD/USD
While the pair enjoys short-term gains, escalating trade tensions and global risk sentiment will be key drivers for future price action. Traders will closely watch further developments in US-China trade relations and additional economic data releases for direction.
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