17 Jan 2025

• NZD/USD depreciates as the US Dollar Index halts its four-day losing streak on Friday.
• Softer US Retail Sales and underlying inflation data reinforced the odds of the Fed cutting rates twice this year.
• The NZD could regain its ground due to the robust economic data from China.
• NZD/USD continues to decline for the second consecutive day, currently trading at approximately 0.5590 during the European trading session on Friday. The downward movement of the NZD/USD pair can be linked to a technical rebound in the US Dollar (USD).
  
  The US Dollar Index (DXY), which measures the performance of the US Dollar against six major currencies, has ended its four-day losing streak, trading around 109.20 at the time of this report. Nevertheless, the Greenback faced challenges as disappointing US Retail Sales and underlying inflation figures heightened market expectations for two interest rate cuts by the Federal Reserve within this year.
• US Retail Sales experienced a month-over-month increase of 0.4% in December, totaling $729.2 billion. This figure fell short of market expectations, which anticipated a 0.6% rise, and was also lower than the previous month's revised increase of 0.8% (originally reported as 0.7%).
  
  In addition, the core Consumer Price Index (CPI) in the United States, which excludes the more volatile food and energy sectors, rose by 3.2% year-over-year in December. This was slightly below the previous month's increase of 3.3% and the market forecast of 3.3%. On a monthly basis, the core CPI increased by 0.2%, compared to a 0.3% rise in the preceding month.
  
  Austan Goolsbee, President of the Chicago Federal Reserve Bank, expressed on Thursday that he has become increasingly assured over recent months that the job market is stabilizing at a level akin to full employment, rather than declining further, as reported by Reuters.
  
  Conversely, the NZD/USD pair encountered difficulties as the New Zealand Dollar appreciated, bolstered by strong economic data from China, a key trading partner. China's Gross Domestic Product (GDP) grew by 5.4% year-over-year in the fourth quarter of 2024, following a 4.6% expansion in the third quarter. This data significantly surpassed the market consensus of 5% for the reported period.
  
  In the fourth quarter of 2024, the Chinese GDP rose by 1.6% quarter-over-quarter, matching the expectations after a 0.9% increase in the previous quarter. Retail Sales in December increased by 3.7%, exceeding the expected 3.5% and the prior figure of 3.0%. Additionally, Industrial Production registered a growth of 6.2%, surpassing the forecast of 5.4% and matching November's 5.4%.