NZD Outlook Shifts as Data and China Tariffs Change

Key Moments

Domestic Demand Resilience Supports NZD Outlook

New Zealand’s household sector has continued to exceed expectations, even before the full impact of the Reserve Bank of New Zealand’s 325bps easing cycle has filtered through the economy. If this strength in household demand broadens, it preserves the possibility that the RBNZ could pivot policy earlier than previously indicated.

Recent retail figures underline that resilience. According to StatsNZ, Q4 retail sales volumes increased 0.9%, outperforming forecasts that were closer to 0.6%. This was the fifth straight quarterly gain, leaving volumes more than 4% above their level a year earlier. Nominal retail spending also remained solid, rising 1.4% over the quarter and almost 5% year-on-year, indicating that consumers are purchasing more goods rather than merely paying higher prices.

The pattern of spending is particularly important. Growth was led by discretionary sectors such as electronics, furniture, hardware, clothing, and recreational goods – categories that tend to be more sensitive to interest rate changes. Hospitality spending also continued to expand, reinforcing the view that household demand is firming rather than faltering.

Rate Path: Earlier RBNZ Tightening Back on the Table

Despite signs that slack remains in New Zealand’s labor market – a factor that should help keep wage and domestic inflation pressures contained in the near term – the policy outlook is becoming more complicated. As fixed-rate mortgages are progressively refinanced into a much lower interest rate environment, stronger household demand could challenge the RBNZ’s current guidance.

If these demand trends persist, the central bank may be forced to consider tightening earlier than the Q4 timing signaled in last week’s updated rate track. Bloomberg data show that swaps traders remain cautious about fully pricing in a rate hike before the general election in early November. However, expectations for an earlier move are gradually increasing, with October currently priced slightly above 50%.

That probability sits uncomfortably close to the election date, leaving September as the more plausible timing for a move if incoming data continue to surprise to the upside.

China Tariff Adjustment and Its Spillover to New Zealand

On the external front, the US Supreme Court ruling last Friday has reshaped the tariff environment for China. Although Donald Trump announced a new 15% global tariff over the weekend, the net effect of the ruling is to lower China’s average tariff burden relative to the prior structure.

Given China’s role as the world’s largest export engine, even modest changes in its trade conditions have wide-reaching consequences. For New Zealand, the implications are direct: China is the country’s largest trading partner, so any stabilization or improvement in Chinese economic activity can feed through to New Zealand’s growth, sentiment, and currency performance.

While continued tariff uncertainty may still generate episodes of volatility across global risk assets, the underlying impact of a potentially less restrictive Chinese tariff environment could be less negative for the New Zealand dollar than initial headlines might imply.

CNH-NZD Link: A Guide, Not a Rulebook

The evolving relationship between NZD/USD and USD/CNH remains an important consideration for FX traders. The NZD/USD rate is often visually aligned with USD/CNH movements when the latter is plotted on an inverted scale, giving a sense of how both currencies are performing against the US dollar over time.

TradingView data highlight that at times the correlation between the two currency pairs tightens meaningfully, with negative correlations indicating that the New Zealand dollar and the yuan are moving in similar directions versus the dollar. At other times, however, that relationship weakens, offering limited actionable insight.

For market participants, the message is clear: yuan performance should be monitored as a directional risk indicator for NZD, but it cannot be relied upon as a mechanical trading rule.

Tariff Ruling Pressures USD as Kiwi Gains Dip Buyers

In Asian trading, the US dollar has come under renewed pressure, extending the selling that began late Friday following the US Supreme Court decision on tariffs. As was seen in April last year after Liberation Day, abrupt shifts in US trade policy have once again been accompanied by dollar selling, signaling the risk of renewed capital outflows from USD assets.

With previous tariffs ruled illegal, a broader question is emerging in markets: why should other countries simply accept the newly revised measures?

For NZD/USD, the backdrop has turned more supportive after the pair drifted toward the lower end of its recent sideways range following last week’s RBNZ decision. The balance of risks now appears to be shifting to the upside. Price action on Friday showed a hammer candle, indicating that demand is returning on dips.

On the topside, traders are focused on resistance at 0.6000 and then at 0.6093, which marks the January high. On the downside, pullbacks below 0.5950 have repeatedly attracted buyers, with demand emerging ahead of support at 0.5925.

Positioning: Preference to Buy Dips While Trend Holds

In the current, headline-driven environment, traders are placing less emphasis on oscillators for directional signals. RSI (14) and MACD are largely neutral, reinforcing the view that momentum is not yet skewed strongly in either direction.

Instead, price structure remains the key focus. NZD/USD continues to trade in a consolidative pattern following its bullish breakout earlier this year, rather than forming a clear deeper correction. With the pair still trading above both the 50-day and 200-day moving averages, the strategic bias remains to buy dips at this stage.

That stance would come under strain if NZD/USD were to break and hold below these key moving averages, which would signal a more meaningful deterioration in the underlying trend.