The New Zealand Dollar (NZD) extended its decline against the US Dollar (USD) on Monday, with NZD/USD trading around 0.5950 in Asian hours. The pair is under pressure after weak domestic services data, while traders look ahead to key Chinese economic releases later in the day.
New Zealand services sector contracts further
The Business NZ Performance of Services Index (PSI) fell to 47.5 in August from 48.9 in July, marking its 18th consecutive month of contraction and staying well below the long-term average of 52.9. The persistent weakness in services highlights ongoing challenges for New Zealand’s economy and weighed on the Kiwi.
Focus turns to Chinese data and US-China talks
Attention now shifts to China’s August Retail Sales and Industrial Production figures, which are expected to show modest improvement. Forecasts point to a 3.8% year-over-year (YoY) rise in Retail Sales, compared with 3.7% previously, and a 5.8% YoY increase in Industrial Production, up from 5.7%.
China remains New Zealand’s largest trading partner, meaning weaker-than-expected readings could add further downside pressure on the NZD.
Meanwhile, US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer met with Chinese Vice Premier He Lifeng in Madrid, with trade and economic cooperation on the agenda. Markets will monitor developments as talks continue into their second day.
Fed outlook limits downside for NZD/USD
The pair’s losses may be cushioned by expectations of imminent Fed easing. The US Dollar has struggled as a softer labor market increases the likelihood of a Fed rate cut this week. Markets are pricing in a 25-basis-point reduction at Wednesday’s meeting, though a larger 50-basis-point move cannot be ruled out.
Looking further ahead, investors expect continued easing through 2026 to support growth. Morgan Stanley and Deutsche Bank now forecast three rate cuts in 2025, projecting 25-basis-point moves at each of the remaining Fed meetings in September, October, and December.
