Kiwi Rises as Soft U.S. Jobs Data Fuels Rate-Cut Bets

Written by Sandra Leggero

Sandra Leggero has a background in financial markets, having spent more than 9 years in commodities trading for several European and Asian companies. She holds a degree in Economics from the University of Pavia and specializes in emerging markets.

, | Updated: February 6, 2026

Key Moments

NZD/USD traded near 0.5980 in early European dealings after two sessions of declines.
Markets have been pricing in two Federal Reserve rate cuts this year, with the first seen in June and a potential second in September.
New Zealand’s latest labor report showed unemployment rising to a decade high, leading markets to delay expectations for a Reserve Bank of New Zealand rate hike.

NZD/USD Rebounds Ahead of U.S. Sentiment Data

NZD/USD advanced toward the 0.6000 area in early European trade on Friday, trading around 0.5980 after falling for two consecutive sessions. The move came as the U.S. Dollar weakened following evidence of a cooling U.S. labor market, which supported expectations for a more dovish Federal Reserve policy outlook.

Market participants are now focused on the preliminary reading of the February U.S. Michigan Consumer Sentiment Index, which is scheduled for release later in the North American session and could influence the next leg in the pair.

Cooling U.S. Labor Market Fuels Fed Easing Bets

The latest U.S. labor indicators have reinforced the view that the job market is losing some momentum, encouraging traders to anticipate lower interest rates from the Federal Reserve this year. Pricing currently reflects expectations for two rate reductions in 2024, with the first cut projected in June and another possible move in September.

According to the CME FedWatch tool, market positioning has indicated nearly a 77.3% probability that the Fed will keep rates unchanged at its March policy meeting, with the first easing step seen in June.

Recent U.S. Labor Data

Fresh figures from the U.S. Department of Labor released on Thursday showed that Initial Jobless Claims increased to 231K for the week ending January 31, exceeding both the consensus estimate of 212K and the prior reading of 209K.

Separately, data from ADP on Wednesday revealed that private sector employment grew by only 22K in January, well below expectations for a 48K gain and weaker than the previously reported 37K (revised from 41K).

Indicator	Period	Latest Value	Consensus	Previous
Initial Jobless Claims	Week ending January 31	231K	212K	209K
ADP Private Payrolls	January	22K	48K	37K (revised from 41K)

RBNZ Expectations Temper NZD Upside

Despite the latest bounce in NZD/USD, gains may be limited by shifting expectations around the Reserve Bank of New Zealand’s policy path. The New Zealand Dollar has been under pressure as market participants scale back the likelihood of an imminent rate increase by the RBNZ.

A mixed domestic labor market update earlier in the week weighed on sentiment. The report showed that unemployment unexpectedly climbed to its highest level in around ten years, even though employment growth surpassed forecasts. This combination prompted traders to delay expectations for near-term monetary tightening.

Pricing now indicates that a rate hike is not fully anticipated until October, while the implied probability of action in September is near 70%. The RBNZ’s first policy meeting under new Governor Anna Breman is set for February 18 and is widely expected to result in no change to official interest rates. Updated economic projections and rate forecasts are also due at that meeting.

New Zealand Dollar: Structural Drivers

The New Zealand Dollar (NZD), commonly referred to as the Kiwi, is a widely traded currency whose value is shaped primarily by the performance of the New Zealand economy and the stance of the RBNZ. However, several structural factors also play an important role.

Key Influences on the NZD

Trade linkages: The performance of the Chinese economy tends to have a notable impact on NZD because China is New Zealand’s largest trading partner. Weaker economic news from China can imply reduced demand for New Zealand exports, which can weigh on both growth and the currency.
Commodity prices: Dairy products are New Zealand’s primary export. Higher dairy prices can increase export revenues, support overall economic activity, and in turn provide a tailwind for the NZD.

RBNZ Policy Framework and NZD

The Reserve Bank of New Zealand targets inflation within a 1% to 3% band over the medium term, aiming to keep it close to the 2% midpoint. To achieve this, the central bank adjusts interest rates as needed.

When inflation pressures are elevated, the RBNZ raises interest rates to cool demand. Higher rates typically lift bond yields, which can attract foreign capital and strengthen the New Zealand Dollar.
When rates are lowered, the resulting decline in yields generally reduces the currency’s appeal, often putting downward pressure on NZD.
The rate differential between New Zealand and the United States – or expectations for how that spread may evolve – is a key driver for the NZD/USD pair.

Economic Data and Risk Sentiment

Macroeconomic releases from New Zealand are closely monitored as indicators of economic health and can significantly influence the NZD’s valuation. Strong growth, low unemployment, and robust confidence tend to support the currency, especially if they raise the likelihood of tighter RBNZ policy in the context of elevated inflation. Conversely, weaker data generally undermines NZD.

Broader market risk appetite is another important factor. The New Zealand Dollar typically performs better in risk-on environments, when investors are optimistic about global growth and show a preference for higher-yielding or commodity-linked assets. During episodes of market stress or uncertainty, investors often reduce exposure to such currencies in favor of perceived safe havens, which can lead to NZD weakness.