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  • NZD/USD correcting steep climb on firm US dollar. 
  • A May 25 cut could be on the cards taking RBNZ’s OCR to 0.75%.

NZD/USD has been correcting the recent rally of consecutive gains as the US dollar firms up at the start of the year. At the time of writing, NZD/USD is trading at 0.6687, -0.67% and potentially en-route to test rising trend line support. 

Markets are likely thinner than usual considering the time of year, but we still have some interesting data to come following yesterday’s Chinese Caixin Manufacturing PMI (Dec) which disappointed slightly. Tomorrow we have the Federal Reserve’s minutes as well as US Manufacturing PMI. However, the major focus for markets stays with a cooling of trade tensions between the US and China. 
This implies an improved outlook for both US and Chinese growth which in turn bolsters the outlook for the antipodeans which are sensitive to expectations regarding global growth.

Trade deal signing ceremony to cool trade tensions

President Trump had previously indicated that he expects to sign the 1st phase of the trade deal with China on January 15. However, there was holiday news that a signing ceremony could take place sooner following a visit this weekend to Washington by the Chinese. Trump also plans to travel to Beijing to discuss a phase 2, though no date for this has yet been given. However, “there are still considerable doubts about the practices of forced technological transfers and intellectual property rights in China. Also, hawkish talk from Washington remains prevalent,” analysts at Rabobank explained. 

As for the Reserve Bank of New Zealand, RBNZ, the domestic growth continues to fall short of the roughly 2.6% yoy rate that the RBNZ needs to see exceeded for inflationary pressure to build and a lower OCR is expected at some stage during the summer meetings – a May 25 cut could be on the cards taking the OCR to 0.75%.

NZD/USD levels