NZD/USD drifts higher above 0.5750 as Fed faces challenges

POPULAR ARTICLES

The NZD/USD pair trades on a firmer note near 0.5770 during the early European trading hours on Tuesday. The US Dollar (USD) remains under selling pressure against the New Zealand Dollar (NZD) amid renewed concerns over the Federal Reserve’s (Fed) independence.

NZD/USD edges higher to around 0.5770 in Tuesday’s early European session.
Fed’s Powell called subpoenas a pretext for interest rate influence.
New Zealand’s Business Confidence jumped to 48% QoQ in Q4 2025, the highest level since March 2014.

The “Sell America” trade resumes after Fed Chair Jerome Powell said he’s under criminal investigation, which traders see as a sign of US President Donald Trump’s interest in stripping away the central bank’s political independence. Powell said on Sunday that the Fed has received subpoenas from the Justice Department over statements he made to Congress last summer on cost overruns for a $2.5 billion building renovation project at the central bank's headquarters in Washington. He termed the threats a "pretext" for putting pressure on the Fed to lower interest rates.

According to the New Zealand Institute of Economic Research’s (NZIER) Quarterly Survey of Business Opinion, the country’s business confidence jumped to 48% QoQ in the fourth quarter (Q4) of 2025, the highest level since March 2014, lifting hiring and investment intentions. This reading provides some support to the Kiwi against the USD.

The release of the US December Consumer Price Index (CPI) inflation data will take center stage later on Tuesday. Both headline and core CPI are projected to show an increase of 2.7% year-over-year. Hotter-than-expected US CPI readings generally strengthen the Greenback against the NZD in the near term.

New Zealand Dollar FAQs

What key factors drive the New Zealand Dollar?

The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.

How do decisions of the RBNZ impact the New Zealand Dollar?

The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.

How does economic data influence the value of the New Zealand Dollar?

Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.

How does broader risk sentiment impact the New Zealand Dollar?

The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.