NZD/USD Rebounds Above 0.5600 Amid Reports of PBOC Signaling Rate Cuts

The NZD/USD pair rebounds slightly, trading near 0.5605 during the early European session on Friday. Support for the China-linked New Zealand Dollar (NZD) comes from expectations that the People’s Bank of China (PBoC) may lower its main interest rate this year.

According to the Financial Times, the Chinese central bank plans to cut rates “at an appropriate time” in 2025. Additionally, the National Development and Reform Commission of China (NDRC) expressed confidence in continued economic recovery and highlighted ample room for macroeconomic policy adjustments in the year ahead. These measures bolster the Kiwi, as China is a key trading partner for New Zealand.

However, US President-elect Donald Trump’s proposed tariffs could weigh on the Kiwi against the USD. In December, Trump announced plans to impose a 25% tariff on all goods from Mexico and Canada and a 10% tariff on Chinese imports. Analysts predict that such actions could strain China’s already weakened economy, with ripple effects impacting New Zealand.

Meanwhile, expectations for fewer Federal Reserve (Fed) rate cuts in 2025 could support the US Dollar and pose challenges for the NZD/USD pair. The Fed has signaled a cautious approach to rate reductions, given persistently high inflation above its 2% target and a resilient economy. Projections from the Fed’s Summary of Economic Projections (dot plot) indicate only two more rate cuts are likely this year.