- NZD/USD strengthens to around 0.6055 in Thursday’s early Asian session.
- US and China to discuss tariff deadline extension next week.
- Traders brace for the preliminary reading of US PMI data for July later on Thursday.
The NZD/USD pair trades in positive territory near 0.6055 during the early Asian session on Thursday, bolstered by improved risk sentiment. Traders will keep an eye on the prospects of US-China trade deals that could improve the global economic outlook.
US President Donald Trump announced a trade deal on Tuesday with Japan, which lowers tariffs on auto imports to 15% in exchange for a $550 billion package of US-bound investment and loans, per Reuters. These positive developments lift the riskier currency, like the New Zealand Dollar (NZD) against the US Dollar (USD).
However, uncertainty over Trump’s tariffs keeps the market on edge. US Treasury Secretary Scott Bessent stated that he will meet with Chinese officials in Stockholm next week to discuss an extension to the deadline for negotiating a trade deal.
Tariffs might return to 145% on the US side and 125% on the Chinese side without a trade agreement or a negotiation extension. Any signs of renewed trade tensions might exert some selling pressure on the China-proxy Kiwi, as China is a major trading partner of New Zealand.
Furthermore, rising expectations of a rate cut from the Reserve Bank of New Zealand (RBNZ) might contribute to the NZD’s downside. Data released on Monday showed New Zealand’s annual inflation rose to a one-year high in the second quarter (Q2) but was below the market consensus. Markets have priced in an 80% possibility of a 25 basis points (bps) cut in August, though investors believe the easing cycle may be nearing its end.
Later on Thursday, the preliminary reading of the US Purchasing Managers Index (PMI) data for July will be in the spotlight. Also, the weekly US Initial Jobless Claims, New Home Sales, and the Chicago Fed National Activity Index will be published. If the reports show weaker-than-expected outcomes, this could weigh on the Greenback and act as a tailwind for the pair.
