The NZD/USD pair remains firm around 0.5680 during Friday’s Asian trading session, though its upside may be capped ahead of the highly anticipated US Nonfarm Payrolls (NFP) data for January, set for release later in the day.
In a move that could escalate trade tensions, China has formally challenged US President Donald Trump’s new 10% tariff on Chinese imports at the World Trade Organization (WTO). The complaint also targets the removal of duty-free exemptions for low-value shipments, arguing that these actions violate WTO regulations. Investors are closely watching these developments, as any signs of worsening US-China trade relations could put pressure on the New Zealand Dollar (NZD), given New Zealand’s strong trade ties with China.
On the domestic front, New Zealand’s fourth-quarter employment data reinforces expectations that the Reserve Bank of New Zealand (RBNZ) will cut its Official Cash Rate (OCR) this month. Market participants are currently pricing in a 92% probability of a 50-basis-point (bps) rate cut to 3.75% on February 19, marking the third consecutive aggressive rate reduction. Such a move would likely weigh further on the NZD.
Meanwhile, a hawkish stance from Federal Reserve (Fed) officials may continue to support the US Dollar (USD). Chicago Fed President Austan Goolsbee cautioned on Thursday that economic uncertainty necessitates a more measured approach to rate cuts. Similarly, Fed Vice Chairman Philip Jefferson pointed to potential policy risks under the Trump administration and noted that the economy’s resilience allows the Fed to proceed cautiously with policy easing.
With key economic data and geopolitical factors in play, NZD/USD traders remain on alert for potential volatility in the coming sessions.
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