- The New Zealand Dollar against the US Dollar (NZD/USD) is strengthening as the Reserve Bank of New Zealand’s (RBNZ) Inflation Expectations for the second quarter of 2025 increased to 2.29% quarter-over-quarter, a notable rise from the previous 2.06%.
- The New Zealand Dollar, often considered a risk-sensitive currency, has benefited from a more positive global outlook, particularly due to signs of de-escalation in trade disputes between the United States and China.
- The US Dollar is currently exhibiting range-bound behavior, reflecting the ambiguity stemming from recent US economic indicators that have presented a mixed picture of the nation’s economic health.
The NZD/USD pair is interrupting its previous two-day decline, currently trading in the vicinity of 0.5890 during Friday’s Asian trading session. The upward movement in the currency pair follows the publication of the Reserve Bank of New Zealand’s (RBNZ) Inflation Expectations data for the second quarter of 2025, a key indicator closely watched by market participants.
The RBNZ’s Inflation Expectations have climbed to 2.29% quarter-over-quarter, surpassing the previous figure of 2.06%. This metric is derived from surveys of business managers and represents their collective expectations for the annual Consumer Price Index (CPI) two years into the future. Furthermore, the Business NZ Purchasing Managers Index (PMI) demonstrated expansion, rising to 53.9 in April, an improvement compared to the prior reading of 53.2, indicating increased business activity in New Zealand.
The risk-sensitive New Zealand Dollar (NZD) has garnered support from a perceived reduction in global trade tensions. A tentative agreement between the United States and China appears to be taking shape, with reports suggesting that the US is considering lowering tariffs on Chinese goods from 145% to 30%. In a reciprocal move, China is expected to reduce tariffs on US imports from 125% to 10%. Market sentiment has also been positively influenced by renewed optimism surrounding the potential for a revived US-Iran nuclear agreement, which could ease geopolitical risks and increase stability in global energy markets. The prospect of reduced trade barriers and geopolitical stability has improved the overall risk appetite among investors, benefiting currencies like the NZD. Investors are now closely monitoring upcoming economic data releases and policy statements from both the US Federal Reserve and the RBNZ for further clues on the future direction of monetary policy.
