Forex News
- NZD/USD appreciates as the US Dollar pares its recent gains from the previous two sessions.
- The New Zealand Dollar strengthened on expectations that the RBNZ will start raising interest rates later this year.
- The Greenback may regain ground as 10-year Treasury yields hover near 4.27% after a sharp prior rise.
NZD/USD recovers losses registered in the previous two consecutive sessions, trading around 0.6050 during the European hours on Tuesday. The pair rebounds as the US Dollar (USD) struggles after two days of gains.
However, the upside of the NZD/USD pair could be limited as the US Dollar may regain its ground, receiving support as the yield on the 10-year US Treasury bond hovered near 4.27% on Tuesday after a nearly 1% rise in the prior session, underpinned by strong US economic data and shifting Federal Reserve (Fed) policy expectations toward hawkish.
Monday’s release showed an unexpected rebound in US factory activity, underscoring economic resilience, as the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) rose to 52.6 from 47.9 in December, beating market expectations of 48.5.
The NZD/USD pair remains stronger despite Stats NZ data showing seasonally adjusted Building Permits fell 4.6% month-over-month (MoM) in December 2025, reversing a downwardly revised 2.7% rise in November.
The New Zealand Dollar (NZD) strengthened against the US Dollar (USD) on expectations that the Reserve Bank of New Zealand (RBNZ) will begin raising interest rates later this year. The central bank’s first policy meeting is scheduled on February 18 under new RBNZ Governor Anna Breman, who is likely to outline her policy direction.
Traders await labor market data due on Wednesday, with the Q4 Unemployment Rate seen holding at 5.3%, the highest since 2016, while Employment is expected to increase 0.3%.
Sentiment was also supported by upbeat data from China, New Zealand’s largest trading partner, after a private survey showed mainland manufacturing expanded at its fastest pace in three months. China’s RatingDog Manufacturing Purchasing Managers' Index (PMI) edged up to 50.3 in January from 50.1 in December, matching expectations and marking the strongest expansion since October.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
Deutsche Bank's Macro Strategy report highlights a positive outlook for the Dollar following strong economic data. The report notes that the ISM manufacturing index unexpectedly surged, contributing to rising optimism for 2026. The Dollar Index increased by 0.66%, marking its best two-day performance since last spring.
Dollar strengthens on positive economic signals
"One of the clearest reactions to the ISM was in US Treasury markets, with yields moving higher as investors priced out the chance of Fed rate cuts. For instance, futures had been pricing in an 87% chance of another rate cut by the June FOMC (which would be Warsh’s first as Chair if confirmed), but that was down to 70% by the close."
"Higher yields supported the dollar index (+0.66%), which has had its best two-day run since last spring."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
The Reserve Bank of Australia (RBA) raised the target cash rate by 25bps to 3.85% in a unanimous decision, citing risks to inflation from excess demand and capacity constraints. The RBA's core inflation forecast was increased from 2.7% to 3.2% for 2026, indicating the likelihood of further action. The AUD is expected to trade between 69-71 cents in the near term, note Prashant Newnaha and Alex Loo from TD Securities.
RBA's hawkish stance on inflation
"The Bank raising its core inflation forecast from 2.7% to 3.2% for 2026 even with the Bank assuming a 4.20% cash rate for this year implies another hike is likely."
"On the domestic side, if growth in demand is stronger than expected, and growth in the economy’s supply capacity remains limited, it is likely to add further to capacity pressures."
"The fact that the RBA raised its core inflation forecast from 2.7% to 3.2% for 2026 suggests the RBA sees capacity constraints as an ongoing issue."
"For now, we don't expect the RBA to hike before its next SoMP meeting and therefore stick with the RBA's next hike to be delivered in May to 4.10%."
"We expect AUD to trade in the 69-71 cents range in the near-term, with a bias to buy the dip."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Gold attracts some buyers on Tuesday as the USD pauses the recent recovery from a four-year low.
- Kevin Warsh’s nomination as the next Fed chair could limit USD losses and cap the precious metal.
- Easing geopolitical and trade tensions might keep a lid on any further gains for the XAU/USD pair.
Gold (XAU/USD) recovers further from its lowest level since January 6, touched the previous day, and retakes the $4,900 mark during the early European session on Tuesday. The US Dollar (USD) edges lower and moves away from an over one-week high, touched on Monday, and assists the commodity to regain positive traction following a steep decline over the past two days. That said, US President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve (Fed) chair, along with upbeat US ISM Manufacturing PMI released on Monday, could limit deeper USD losses.
Furthermore, signs of de-escalation of US-Iran tensions over the latter's nuclear program, along with the US-India trade deal, remain supportive of a positive risk tone, which could cap the safe-haven Gold. Apart from this, the CME Group's decision to raise margin requirements on precious metals futures might turn out to be another bearish development for the precious metal. Hence, it will be prudent to wait for strong follow-through buying before confirming that the recent sharp corrective slide from the $5,600 mark, or the record high touched last week, has run its course.
Daily Digest Market Movers: Gold bulls retain intraday control amid softer USD
- US President Donald Trump on Friday nominated Kevin Warsh to succeed Jerome Powell as the next Federal Reserve Chair in May, pending Senate approval. Warsh’s background as a hawk suggests that he would remain vigilant if inflation expectations begin to rise.
- Adding to this, the CME Group said over the weekend that it would increase margins on precious metals futures starting from the close of markets on Monday. This prompted liquidation for the second straight day and dragged the Gold to a four-week low on Monday.
- On the economic data front, the Institute for Supply Management reported on Monday that the US factory activity grew for the first time in a year. In fact, the Manufacturing PMI rose to 52.6 in January, marking a significant recovery from 47.9 in the previous month.
- Meanwhile, Trump announced on Monday that the US and India have reached a trade deal and will immediately move to lower tariffs on each other’s goods. Moreover, Iran and the US are expected to resume nuclear talks on Friday, further boosting investors' confidence.
- The US Dollar ticks lower on Tuesday and moves away from an over one-week high, touched the previous day, lending some support to the Gold during the Asian session. The aforementioned negative factors, however, might keep a lid on further gains for the bullion.
- The release of the Job Openings and Labor Turnover Survey (JOLTS) for December 2025 and the Nonfarm Payrolls (NFP) report will be delayed due to a partial US government shutdown. Hence, the USD price dynamics would continue to influence the XAU/USD pair.
Gold is likely to confront stiff resistance near $5,000
The commodity showed resilience below the 50-day Simple Moving Average (SMA) and bounced off the 50% retracement level of the July 2025-January 2026 rally on Monday. The upward slope of the SMA suggests dips could be supported. Adding to this, the XAU/USD pair currently holds above the 38.2% Fibonacci retracement level, pegged around the $4,645-4,650 area, and should offer nearby support. Moreover, the Relative Strength Index (RSI) sits at 51.91 and edges higher, hinting at stabilizing momentum.
However, the Moving Average Convergence Divergence (MACD) line stands below the Signal line and below zero, reinforcing a bearish tone. The negative histogram widens, pointing to intensifying downward momentum. Meanwhile, any further move up could refocus the 23.6% retracement at $4,995.94, while failure to hold the first support would leave the recovery vulnerable to further consolidation.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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