The New Zealand dollar entered an eighth consecutive day of gains against the U.S. dollar on Thursday, lifted by optimism ahead of the G20 summit set to commence on Friday. Earlier in the week the Kiwi got a boost after Stats NZ reported a wider-than-expected May trade surplus and the Reserve Bank of New Zealand held back from cutting interest rates.
China is New Zealand’s largest trading partner in goods and its second largest trading partner in services. A weakening Chinese economy typically has a negative effect on the value of the New Zealand dollar.
Presidents Donald Trump and Xi Jinping are set to meet at the G20 summit in Osaka, Japan taking place on taking place on June 28th and 29th. Positive news surrounding the meeting this week has helped to underpin the New Zealand dollar.
According to a report published on Thursday by the South China Post, the two superpowers have agreed to a “tentative truce” before the summit and that fresh tariffs are expected to be delayed.
RBNZ Holds Rates
On Tuesday the Reserve Bank of New Zealand kept rates on hold at 1.50 percent, as widely expected. While it refrained from cutting interest rates, the central bank did convey a dovish signal that it may lower the cash rate in the future. Investors focused on the fact that rates were not cut at the meeting, giving the New Zealand dollar a lift higher.
Looking at the daily chart above we can see that NZD/USD is nearing the 200 period simple moving average. Potential resistance looms above with the confluence of the 200 period simple moving average and the prior lows of 0.6704.
The Bottom Line
The market now eyes the G20 meeting in Osaka and whether China and the United States can really resolve their ongoing trade disputes. The outcome of the summit will impact the policy stance of the Federal Reserve. Further tariffs and a lack of progress will increase the chances of Fed rate cuts, while positive developments and an agreement to not impose more tariffs will lower the likelihood of Fed rate cuts.