Key Moments
- NZD/USD trades around 0.6060, extending gains into a second session as markets await next week’s RBNZ decision.
- CME FedWatch tool indicates nearly a 92% probability the Federal Reserve keeps rates unchanged at its next meeting, up from 80% a day earlier.
- January Nonfarm Payrolls rise by 130,000, beating expectations of 70,000, while the U.S. Unemployment Rate slips to 4.3% from 4.4%.
NZD/USD Supported Ahead of RBNZ Meeting
NZD/USD is holding on to recent gains for a second straight session, trading near 0.6060 during Thursday’s European session. The pair remains underpinned as the New Zealand Dollar benefits from a cautious tone in markets in the run-up to next week’s Reserve Bank of New Zealand policy announcement, where the central bank is widely expected to keep interest rates unchanged.
Participants are also turning their attention to RBNZ Inflation Expectations for the first quarter of 2026, scheduled for release on Friday. That data is likely to provide additional guidance on the medium-term inflation outlook before policymakers convene.
Focus Shifts to U.S. CPI as Dollar Stays Soft
The kiwi’s strength is being helped by a subdued U.S. Dollar, even as expectations build that the Federal Reserve will leave rates on hold following stronger-than-anticipated U.S. labor market data. Market attention is now moving toward the upcoming U.S. Consumer Price Index report, which is set to be the key event later in the North American session.
According to the CME FedWatch tool, market pricing currently reflects nearly a 92% chance that the Fed will keep rates unchanged at its next meeting, compared with 80% just one day earlier. Investors are also positioned for a potential first rate cut in June, with a possible additional move in September.
U.S. Labor Data Surprises to the Upside
January Nonfarm Payrolls increased by 130,000, following a revised 48,000 rise in December, which was previously reported as 50,000. The latest figure outpaced market expectations of 70,000. At the same time, the U.S. Unemployment Rate edged down to 4.3% from 4.4%.
| Indicator | Latest Reading | Previous (Revised) | Previous (Initial) | Market Expectation |
|---|---|---|---|---|
| Nonfarm Payrolls (January) | 130,000 | 48,000 (December) | 50,000 (December) | 70,000 |
| Unemployment Rate | 4.3% | 4.4% | – | – |
| Fed hold-probability (next meeting) | ~92% | 80% (previous day) | – | – |
New Zealand Dollar: Key Drivers and Macro Links
The New Zealand Dollar, commonly referred to as the Kiwi, is heavily influenced by the overall performance of the New Zealand economy and the stance of the Reserve Bank of New Zealand. However, several distinctive factors can also drive NZD price action.
Economic conditions in China play an important role, as China is New Zealand’s largest trading partner. Weaker Chinese activity tends to imply softer demand for New Zealand exports, which can weigh on the domestic economy and the currency. Dairy prices are another critical factor, given that dairy products constitute New Zealand’s primary export. Elevated dairy prices bolster export revenues, supporting growth and, in turn, the NZD.
RBNZ Policy and Rate Differentials
The RBNZ targets inflation within a 1% to 3% band over the medium term, seeking to keep it close to the 2% midpoint. To achieve this objective, the central bank adjusts interest rates to either restrain or stimulate the economy.
When inflation is running too high, the RBNZ typically raises interest rates to cool demand, which also lifts bond yields and can enhance the attractiveness of New Zealand assets, providing support to the NZD. Conversely, lowering interest rates tends to put downward pressure on the currency. The interest rate differential between New Zealand and the United States, and how it is expected to evolve, is a central factor for the NZD/USD pair.
Role of Domestic Data and Risk Appetite for NZD
New Zealand macroeconomic data releases are closely monitored as indicators of the economy’s strength and can significantly influence the valuation of the New Zealand Dollar. Robust growth, low unemployment, and firm economic confidence are typically positive for NZD, and persistent strength may prompt the RBNZ to consider raising interest rates if accompanied by elevated inflation. On the other hand, weaker data generally weighs on the currency.
Broader market risk sentiment is another important influence. The NZD often appreciates in risk-on environments when investors are more optimistic about global growth and demand for commodities and so-called commodity currencies increases. During periods of market stress or economic uncertainty, investors tend to scale back exposure to higher-risk assets, which can lead to NZD underperformance as capital flows into perceived safe-haven assets.




