The NZD/USD currency pair recovered its earlier losses, trading around 0.5640 during the early European session on Friday, as it halted a losing streak. However, downside risks persist due to the strengthening US Dollar (USD), which has gained momentum following a hawkish 25 basis point rate cut by the Federal Reserve (Fed) at its December meeting. Market participants are now turning their attention to the upcoming US Personal Consumption Expenditures (PCE) data, set to be released by the US Bureau of Economic Analysis later today.
The US Dollar’s recent gains were further bolstered by stronger-than-expected economic data. US Gross Domestic Product (GDP) for the third quarter grew at an annualized rate of 3.1%, surpassing both market forecasts and the previous reading of 2.8%. In addition, Initial Jobless Claims fell to 220,000 for the week ending December 13, down from 242,000 the previous week and better than the expected 230,000.
In New Zealand, the country’s trade deficit narrowed significantly in November, thanks to a rise in exports and a decrease in imports. The trade deficit stood at NZD 437 million in November, a sharp improvement from the NZD 1.658 billion deficit in October. Exports increased by 9.1% year-on-year to NZD 6.48 billion, while imports fell by 3.9% to NZD 6.92 billion.
However, the New Zealand Dollar continues to face pressure after weaker-than-expected GDP data for the third quarter, which fueled expectations of more aggressive monetary policy easing by the Reserve Bank of New Zealand (RBNZ). Markets are anticipating a significant 50 basis point rate cut at the RBNZ’s February meeting.
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