NZD/USD Drops to 0.5940 After Weak NZ CPI and Steady PBoC Loan Rates

NZD/USD Slides to 0.5940 After Soft CPI and Unchanged PBoC Rates

Weak CPI Print Puts Pressure on NZD/USD

The NZD/USD pair moved lower on Monday, trading around 0.5940 during the Asian session after New Zealand’s Q2 Consumer Price Index (CPI) came in weaker than expected. CPI rose 2.7% year-over-year, slightly below the projected 2.8%, while the quarterly CPI dropped 0.5%, missing the 0.6% forecast and down from 0.9% in Q1.

The softer data reinforces expectations that the Reserve Bank of New Zealand (RBNZ) will hold the Official Cash Rate (OCR) at 3.25% during its August policy meeting.

PBoC Keeps Rates Steady, Weighs on Kiwi

Adding to the Kiwi’s decline, the People’s Bank of China (PBoC) decided to keep its one-year Loan Prime Rate (LPR) at 3.00% and the five-year LPR at 3.50% in July. While expected, the decision reflects China's cautious stance amid sluggish economic momentum.

Given China’s position as New Zealand’s largest trading partner, developments in the Chinese economy and monetary policy carry significant implications for the New Zealand Dollar (NZD).

Trade Tensions Add to Downside Risk

In addition to economic data, ongoing trade tensions between the US and China are adding to investor caution. With an August 12 deadline looming for China to finalize a long-term tariff agreement with the US, risk sentiment surrounding the Kiwi remains fragile.

What to Watch Next

Market focus now shifts to the New Zealand Trade Balance data due Tuesday. A weaker print could compound downside pressure on NZD/USD, especially if global risk sentiment deteriorates further.