Kiwi Slips as Firm U.S. Data and Trade Tensions Pressure NZD/USD

Key Moments

NZD/USD trades near 0.5740, holding earlier declines as the U.S. Dollar strengthens on robust economic data.
U.S. Retail Sales increased 0.6% in November to $735.9 billion, while November PPI rose 3% YoY for both headline and core measures.
Renewed concerns over U.S.-China trade tensions weigh on the New Zealand Dollar following new U.S. tariffs on semiconductors and potential levies on critical minerals.

NZD/USD Under Pressure Ahead of U.S. Labor Data

NZD/USD has given back gains from the prior session and is trading around 0.5740 during European hours on Thursday. The pair is weaker as the U.S. Dollar (USD) advances, supported by stronger-than-expected U.S. economic data that has reinforced expectations that the Federal Reserve will leave interest rates unchanged in the coming months. Market participants are also awaiting the release of weekly U.S. Initial Jobless Claims later in the day.

Stronger U.S. Data Supports the Dollar

On Wednesday, the U.S. Census Bureau reported that Retail Sales rose to $735.9 billion in November, an increase of 0.6%. This followed a 0.1% decline in October and exceeded market expectations for a 0.4% gain.

At the same time, November Producer Price Index (PPI) data showed stronger price pressures, with both the headline and core measures rising 3% year-over-year.

U.S. Indicator	Period	Latest Reading	Prior	Expectation
Retail Sales	November	0.6% ($735.9 billion)	-0.1%	0.4%
PPI (headline, YoY)	November	3%	Not stated	Not stated
PPI (core, YoY)	November	3%	Not stated	Not stated

Commentary from Federal Reserve officials and shifts in rate expectations have further supported the U.S. Dollar. Minneapolis Fed President Neel Kashkari said on Wednesday that the overall economy seems quite resilient and that he has seen less tariff pass-through than expected. Kashkari added that inflation is still too high but is moving the right way. Additionally, Morgan Stanley analysts postponed their projected timing for rate cuts to June and September from January and April after Friday’s jobs report.

Trade Tensions Weigh on the New Zealand Dollar

The New Zealand Dollar (NZD) is also coming under pressure from renewed concerns about trade frictions between the United States and China, New Zealand’s key trading partner. On Wednesday, U.S. President Donald Trump signed two executive orders imposing a 25% tariff on certain semiconductors and authorizing potential tariffs on critical minerals.

The White House stated that the United States is 100% net-import reliant on 12 critical minerals and more than 50% reliant on imports for 29 others. This dependence has increased China’s leverage in recent U.S.-China discussions, given China’s dominance in critical minerals and processing.

Fundamental Drivers of the New Zealand Dollar

The New Zealand Dollar (NZD), often referred to as the Kiwi, is widely traded and its valuation is shaped by the state of the New Zealand economy and the policy stance of the country’s central bank. Several additional factors can influence NZD moves, particularly its close economic ties with China and exposure to commodity trends.

Role of China and Dairy Prices

Developments in the Chinese economy are a key driver for NZD, as China is New Zealand’s largest trading partner. Weak economic news from China can imply lower demand for New Zealand exports, which can hurt New Zealand’s economy and weigh on the currency. Dairy prices also play an important role because the dairy sector is New Zealand’s main export industry. Higher dairy prices support export revenues and can be positive for both the economy and the New Zealand Dollar.

Impact of RBNZ Policy on NZD

The Reserve Bank of New Zealand (RBNZ) targets an inflation range of 1% to 3% over the medium term, aiming to keep inflation close to the 2% midpoint. To achieve this, the RBNZ sets interest rates at what it deems an appropriate level. When inflation is elevated, the central bank may raise interest rates to cool the economy, which can also lift bond yields and enhance the attractiveness of New Zealand assets, tending to support NZD. Conversely, lower rates generally put downward pressure on the currency.

The interest rate differential between New Zealand and the United States, as well as market expectations regarding future moves by the RBNZ versus the U.S. Federal Reserve, can significantly influence the NZD/USD exchange rate.

Macro Data and Risk Sentiment

New Zealand macroeconomic releases are essential for assessing economic conditions and can have a direct impact on NZD. Strong data characterized by robust growth, low unemployment, and solid confidence can attract foreign investment and may encourage the RBNZ to raise interest rates if inflation is also elevated. Weak data typically has the opposite effect, often leading to NZD depreciation.

Broader global risk appetite is another important factor. The New Zealand Dollar tends to appreciate during risk-on phases, when investors are optimistic about growth prospects and more inclined toward commodities and higher-risk assets, including so-called commodity currencies like the Kiwi. During periods of market stress or uncertainty, investors often reduce exposure to riskier assets and move toward perceived safe havens, which can pressure NZD lower.