The NZD/USD currency pair rose slightly to approximately 0.5715 during Monday’s Asian trading session, driven by weaker-than-expected Chinese inflation figures that weighed on the New Zealand Dollar (NZD). Looking ahead, the US Consumer Price Index (CPI) report for February will be the focal point for traders on Tuesday.
China’s February CPI report, released on Sunday, showed a surprising decline, falling 0.7% year-over-year. This marked the sharpest drop since January 2024, reversing January’s 0.5% increase. According to the National Bureau of Statistics (NBS), the disappointing data highlights ongoing deflationary pressures in China.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, noted, “China’s economy still faces deflationary pressure. While sentiment was boosted by developments in the technology sector, domestic demand remains weak.” The sluggish household consumption and weak domestic demand in China continue to raise concerns about the world’s second-largest economy, putting additional pressure on the NZD, which is sensitive to Chinese economic performance due to the country’s status as a key trade partner for New Zealand.
Meanwhile, the US February Nonfarm Payrolls (NFP) data, which came in weaker than expected, added to market speculation that the Federal Reserve may cut interest rates multiple times later this year. This potential easing could weaken the US dollar, potentially benefiting the NZD/USD pair. Financial markets are anticipating that the Fed may resume rate cuts by June, although inflation trends will largely determine the central bank’s next move.
Federal Reserve officials have varied views on the outlook. San Francisco Fed President Mary Daly, in a speech on Friday, acknowledged rising uncertainty among businesses but suggested that with the economy and interest rates in a “good place,” the Fed should refrain from making hasty policy adjustments. Fed Chairman Jerome Powell, in a separate interview, indicated that the central bank could afford to wait and observe the impact of President Donald Trump’s policies before taking further action on interest rates, adding that policy uncertainty complicates decision-making.
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