NZD/CNY Outlook:
Slightly positive, but likely to move sideways as the rate is above its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The Reserve Bank of New Zealand is signaling potential interest rate cuts, while the People's Bank of China is maintaining a "moderately loose" monetary policy which keeps interest rates steady.
• Risk/commodities: Recent high dairy prices have supported New Zealand's export income, providing some backing for the NZD despite broader market weakness.
• One macro factor: Ongoing concerns regarding the New Zealand labor market, stemming from unexpected increases in unemployment, are affecting the NZD's performance.
Range:
Expect the NZD/CNY to hold within its recent 3-month range as it lacks momentum to test either extreme.
What could change it:
• Upside risk: A swift recovery in the New Zealand labor market could enhance the NZD's appeal.
• Downside risk: Continued deterioration in regional risk appetite due to global economic tensions could pressure the NZD further.