The NZD/USD pair is on a three-day winning streak, trading around 0.6250 during the early European hours on Friday. The New Zealand Dollar (NZD) has strengthened following the People’s Bank of China (PBoC) decision to maintain its one-year and five-year Loan Prime Rates (LPRs) at 3.35% and 3.85%, respectively. Given the close trade relationship between New Zealand and China, developments in the Chinese economy have a significant impact on Kiwi markets.
In New Zealand, recent economic data revealed a 0.2% quarter-on-quarter decline in Gross Domestic Product (GDP) for the second quarter, bringing the economy close to recession. This contraction was less severe than the anticipated 0.4% drop, while the year-on-year contraction of 0.5% was in line with expectations. Markets are currently pricing in a likely 25 basis point rate cut in October.
Meanwhile, the US Dollar is under pressure as speculation mounts for additional rate cuts by the US Federal Reserve by the end of 2024. Recent dot plot projections indicate a gradual easing cycle, with the median rate for 2024 revised down to 4.375% from the previous June forecast of 5.125%.
US Treasury Secretary Janet Yellen commented on Friday that the recent interest rate cut by the Federal Reserve is a positive sign for the US economy. She emphasized that it reflects the Fed‘s confidence in a significant reduction in inflation, moving toward the 2% target, while the job market remains robust.
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