Anna 
In early European trading on Wednesday, the NZD/USD pair continued its three-day descent, reaching approximately 0.6120. The downward trend is attributed to heightened risk aversion stemming from geopolitical conflicts in the Middle East. Additionally, speculation surrounding a potential rate cut by the Federal Reserve (FED) in March is contributing to the negative pressure on the currency pair.
Despite a mixed economic landscape in China, the New Zealand dollar (NZD) remains under pressure. China’s fourth-quarter gross domestic product (GDP) registered a growth rate of 5.2%, slightly below the anticipated 5.3%. Industrial production exceeded expectations by rising 6.8% year-on-year in December, while retail sales disappointed with a 7.4% year-over-year increase, falling short of the consensus estimate of 8.0%.
Concerns about weakened demand from China are impacting the NZD, given the close economic ties between the two nations. Chinese consumer prices experienced a third consecutive monthly decline in December, accompanied by a drop in producer prices, further raising apprehensions about the economic health and demand from New Zealand’s primary trading partner.
The U.S. dollar index (DXY) maintained stability near 103.50, bolstered by higher U.S. Treasury yields, with the 2-year and 10-year yields standing at 4.26% and 4.07%, respectively. The demand for the U.S. dollar (USD) has been reinforced by risk aversion and certain hawkish remarks from Federal Reserve (Fed) officials.
Market participants closely monitored the release of U.S. retail sales data for December, seeking insights into consumer spending patterns. Additionally, attention was directed towards the “Beige Book” released by the Federal Reserve and a speech by New York Fed President John C. Williams to gain a deeper understanding of the central bank’s monetary policy stance.
