Impact Of China’s Economic Data
NZD/USD dropped to around 0.5620 during Friday’s Asian trading session. This decline followed China’s October trade surplus shrinking to $90.07 billion from $90.45 billion in September, missing the forecast of $95.60 billion.
China’s export growth was 1.1% year-over-year in October, falling short of the expected 3.0%. Imports rose by just 1.0%, below the anticipated 3.2%, potentially impacting New Zealand’s economy as China is its major trading partner.
New Zealand’s unemployment rate in the third quarter rose to 5.3%, the highest since 2016. This jobs data strengthens the case for a rate cut by the Reserve Bank of New Zealand, expected to reduce rates by 25 basis points on November 26.
US job cuts surged in October, with companies cutting over 150,000 positions, the largest reduction in over 20 years. Market bets on a December rate cut by the US Federal Reserve increased, with a 70% probability of a move, up from 62% the previous day.
Economic data from New Zealand and China heavily influences the NZD, with factors like dairy prices also playing a role. Decisions by the Reserve Bank of New Zealand and broader market risk sentiment further affect the currency’s value.
The NZD/USD pair is facing downward pressure today, November 7, 2025, due to China’s weaker-than-expected October trade figures. This is a key development because New Zealand’s economy is highly dependent on exports to China. The market is now looking for signs of whether this slowdown is a trend.
Market Reactions And Strategies
The slowdown in China seems to be broadening, as we saw their official NBS Manufacturing PMI for October 2025 dip to 49.5, indicating a contraction. This weakness in our largest trading partner is a direct headwind for the Kiwi dollar. Derivative traders should consider that any further negative data out of China in the coming weeks will likely push NZD/USD lower.
Pressure is also coming from home, with our third-quarter unemployment rate rising to 5.3% from 5.1% in the prior quarter. This is the highest level we have seen since 2016 and all but guarantees the RBNZ will cut its 2.75% cash rate on November 26. This expectation is a significant weight on the New Zealand dollar.
On the other side of the pair, the US dollar is also showing signs of weakness. Last week’s Non-Farm Payrolls report for October 2025 came in at a disappointing 120,000, well below consensus, fueling bets that the Fed will cut rates in December. This makes a simple short position on NZD/USD more complicated.
Given that both the RBNZ and the Fed are looking to cut rates, we are in a “race to the bottom” scenario for interest rates. This environment suggests that volatility in the NZD/USD pair could increase as markets react to which central bank seems more dovish. Traders might consider strategies like straddles or strangles to profit from a significant price move in either direction, rather than just a simple directional bet.
Another approach is to look at cross-currency pairs to isolate the weakness. For example, if we believe the NZD weakness is more pronounced than weakness in other commodity currencies, pairing it against the AUD might be a clearer trade. Looking back at similar global slowdowns, like the one in the late 2010s, we saw divergence among commodity currencies which presents opportunities.
