The New Zealand dollar advanced toward $0.56 on Tuesday, extending its gains from Monday. This rally came as New Zealand’s business confidence index rose significantly in the fourth quarter of 2024, reaching its highest point since the second quarter of 2021.
The boost follows recent rate cuts by the Reserve Bank of New Zealand (RBNZ), which helped lift market sentiment.
Businesses may be feeling hopeful about the future, but fragile demand and weak trading activity are keeping the Kiwi dollar grounded.
Picture: NZD/USD rallies to 0.56050 as bullish momentum signals potential breakout scenarios, as seen on the VT Markets app.
The NZD/USD pair has shown steady upward movement, closing at 0.56050 after reaching a high of 0.56172. The moving signals show a likelihood of continued positive momentum, supported by recent developments around the RBNZ’s hawkish stance around upcoming rate cuts.
Currently, markets are pricing in an 82% probability that the RBNZ will deliver a 50 basis point rate cut at its February meeting. While rate cuts typically weaken a currency, the Kiwi dollar has found support in broader macroeconomic developments, such as improved confidence and external trade dynamics.
China’s strengthened measures to support the yuan, including adjustments to capital controls, have also provided indirect support to the New Zealand dollar.
Strong Chinese trade data, which exceeded market expectations, further reinforced the positive sentiment. China is a key trading partner for New Zealand, so any signs of economic stability in the region often translate into tailwinds for the Kiwi dollar.
Despite these positive drivers, the Kiwi dollar faced resistance from a robust U.S. dollar. Following last week’s strong U.S. payroll data, traders scaled back expectations for further Federal Reserve rate cuts. This has kept the greenback sturdy against the pressure of its peers, limiting the Kiwi dollar’s potential for more significant gains.
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