The NZD/USD pair has remained under pressure for the third consecutive session, hovering around the 0.5660 mark during European trading hours on Thursday. The currency’s weakness can be attributed to the growing strength of the US Dollar (USD), driven by expectations of a hawkish stance from the US Federal Reserve (Fed).
Market participants are confident, as indicated by the CME FedWatch tool, that the Fed will maintain its current key borrowing rate range of 4.25%-4.50% throughout the next three policy meetings. Additionally, inflationary pressures stemming from US President Donald Trump’s policies could limit the Fed to a single rate cut in 2025.
In a recent development, President Trump announced that his administration is considering a 10% tariff on Chinese imports, set to take effect on February 1. While lower than the previously threatened 60% rate, the new tariff reflects a commitment to policies promised during his presidential campaign.
Investors will be closely watching the release of two important economic indicators on Friday: the preliminary US S&P Global Purchasing Managers Index (PMI) and the Michigan Consumer Sentiment Index for January. These reports are expected to provide further insights into the economic outlook.
Meanwhile, the New Zealand Dollar (NZD) struggled to gain traction despite efforts to stimulate growth both domestically and from key trading partner China. New Zealand’s Prime Minister Christopher Luxon unveiled plans to relax foreign investment regulations in an effort to attract global investors, but the NZD remained under pressure, a reflection of broader market caution.
In China, authorities have rolled out several measures to support the domestic stock market, including allowing pension funds to increase their equity investments. Additionally, a pilot program aimed at enabling insurers to purchase stocks will begin in the first half of 2025, with an initial investment target of 100 billion Yuan. Despite these efforts, the NZD continued to face challenges in the market.
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