The NZD/USD pair is consolidating its recent strong gains near a one-month peak, touched on Friday, as it oscillates within a narrow range at the start of the new week. Spot prices are holding steady below the mid-0.5700s, showing limited reaction to recent disappointing Chinese economic data.
Specifically, China’s RatingDog Manufacturing Purchasing Managers’ Index (PMI) unexpectedly reverted to contraction in November, dropping to 49.9 from 50.6 in October. This follows official PMIs released over the weekend, which indicated an eighth consecutive month of contraction in China’s manufacturing sector and the first contraction in the services sector in nearly three years, reaching its lowest point since December 2022.
Despite these figures, the immediate market reaction has been muted, likely due to easing trade tensions and recent government initiatives aimed at stimulating consumption in the world’s second-largest economy. This, coupled with the Reserve Bank of New Zealand’s (RBNZ) hawkish stance on future policy, continues to support the New Zealand Dollar (NZD). Additionally, the prevailing selling bias for the US Dollar (USD) provides further uplift for the NZD/USD pair.
Last week, the RBNZ delivered a fully anticipated 25 basis points (bps) rate cut, signaling the conclusion of its easing cycle. In contrast, traders are now pricing in over an 85% probability that the US Federal Reserve (Fed) will again lower borrowing costs this month. This divergence in monetary policy outlooks, alongside the broader bullish market sentiment, contributes to the Greenback’s relative underperformance against the risk-perceived Kiwi, supporting further appreciation for the NZD/USD pair.
