Insights 
VT 
The New Zealand Dollar gained strength due to optimism surrounding a trade agreement between the US and China. Expectations of a Federal Reserve interest rate cut this week further boosted the Kiwi. The US Dollar faced pressure ahead of the FOMC meeting and the Trump–Xi summit.
NZD/USD was firm at the week’s start, trading around 0.5760, up 0.25% on Monday. A framework agreement was announced by the US and China, involving China easing rare earth export restrictions and buying US soybeans, while the US withdrew plans for additional tariffs.
Easing Trade Tensions Impact
Easing trade tensions are predicted to enhance demand for Asia-linked currencies like the NZD. Meanwhile, focus shifts to the Federal Reserve, with markets expecting a 25 basis-point rate cut. Fed policymakers remain divided on the pace of rate cuts, with internal debates affecting the US Dollar.
A dovish Fed stance and constructive US-China talks continue to support the NZD/USD pair. The New Zealand Dollar showed the largest strength against the Japanese Yen today, as reflected in percentage changes compared to other major currencies. The heat map illustrates these currency changes, showing the NZD’s position against the US Dollar and others.
We are seeing a familiar setup where optimism around US-China relations and a potentially dovish Federal Reserve could boost the NZD/USD pair. As of today, October 27, 2025, high-level talks are scheduled next month between Washington and Beijing to discuss easing technology sector tariffs. This has markets recalling the sentiment shifts we saw during the trade disputes of 2019.
The New Zealand Dollar, trading near 0.5950, is finding support from signs of stabilization in China, its largest trading partner. China’s latest Caixin Manufacturing PMI unexpectedly ticked up to 50.2, the first expansionary reading in three months, easing fears of a sharp slowdown. This is crucial for the Kiwi, as New Zealand’s export volumes to China are up 4% year-over-year, according to the latest data from Statistics New Zealand.
US Dollar Pressure and Market Volatility
On the other side of the pair, pressure is building on the US Dollar as the Fed holds rates steady at 5.25%. Following the aggressive hiking cycle of 2022-2023, recent US Non-Farm Payrolls data showed job creation slowing to 160,000, missing expectations for the second straight month. The CME FedWatch Tool now shows markets are pricing in a 45% chance of a rate cut by the end of the first quarter of 2026, a significant change from just a few months ago.
Given this backdrop, we believe traders should consider buying NZD/USD call options with expirations in early 2026 to capitalize on potential upside if the Fed signals a clearer dovish pivot. This strategy offers defined risk in case the US-China talks falter or if the Reserve Bank of New Zealand hints at cutting its own rates first. The key risk is a hawkish surprise from the Fed, but weakening economic data makes that less likely.
Looking back at the sharp rallies in late 2019 on trade deal hopes, we know this pair can move quickly on shifting geopolitical news. Implied volatility for NZD/USD has already risen to a three-month high ahead of the upcoming talks and the next FOMC meeting. Therefore, any long positions should be managed carefully, as we saw how quickly positive sentiment could reverse back then if negotiations hit a snag.
