New Zealand Dollar falls on RBNZ rate cut expectations, US Dollar holds firm

The New Zealand Dollar slips as near-certain expectations of another RBNZ rate cut weigh on sentiment.
US Dollar remains supported as traders scale back bets on near-term Fed easing.
Attention turns to NZ trade figures and US flash PMIs releases on Friday.

Vishal Chaturvedi FXStreet

The New Zealand Dollar (NZD) pares early gains against the US Dollar (USD) on Thursday, as near-certain expectations of another interest rate cut by the Reserve Bank of New Zealand (RBNZ) keep the Kiwi under sustained pressure. At the time of writing, NZD/USD is trading around 0.5593, easing after a brief, volatile spike to 0.5639 in the immediate reaction to the release of the delayed US labour data.

Earlier in the day, markets received the first official US employment data in weeks after delays caused by the government shutdown. The September Nonfarm Payrolls (NFP) rose 119K, strongly beating the 50K forecast, while August was revised down to show a 4K decline instead of the originally reported 22K increase. The Unemployment Rate climbed to 4.4%, slightly above expectations for 4.3%.

Additionally, the Labour Force Participation Rate improved slightly to 62.4% from 62.3. Wage growth came in softer than projected, with Average Hourly Earnings rising 0.2% MoM against the 0.3% estimate, while annual wage growth stood at 3.8% YoY, marginally above the 3.7% forecast. Average Weekly Hours held steady at 34.2.

The mixed labour data did little to alter expectations around the Federal Reserve’s (Fed) monetary policy outlook. Markets had already been trimming rate-cut bets after a series of cautious comments from Fed officials, who warned that another cut in December could risk reigniting inflation pressures. Some policymakers acknowledged that the labour market is cooling, but stressed that it remains resilient, reinforcing the argument for a careful and measured approach to easing.

In New Zealand, markets are awaiting next week’s Reserve Bank of New Zealand (RBNZ) policy meeting, with another rate cut already fully priced in. Traders widely expect the central bank to deliver another round of easing after October’s surprise 50-basis-point cut, with softening inflation expectations, weak business confidence and subdued domestic demand all reinforcing the case for lower rates.

Looking ahead, traders will monitor New Zealand’s October trade data due on Friday, including Exports, Imports, and the monthly and annual Trade Balance readings. In the US, focus turns to the S&P Global flash Purchasing Managers Index (PMIs) for November, followed by the University of Michigan Consumer Sentiment Index and its accompanying inflation-expectation measures.

Economic Indicator

Trade Balance NZD (YoY)

Trade balance, released by Statistics New Zealand, is the difference between the value of country's exports and imports, over a period of year. A positive balance means that exports exceed imports, a negative ones means the opposite. Positive trade balance illustrates high competitiveness of country's economy.

AUD/USD hangs near three-week low, below 0.6950 as traders await US NFP report

AUD/USD hits a three-week low during the Asian session on Friday as the RBA’s dovish shift and a rout in equity markets weigh on the risk-sensitive Aussie. However, the recent slump in US bond yields to a two-month low keeps US Dollar bulls on the back foot and limits losses for the currency pair as traders look to the US NFP report for a fresh impetus.

USD/JPY bounces off three-week low; keeps the red near 157.65 as focus remains on US NFP

USD/JPY bounces off the weekly low set during the Asian session, as bears turn cautious ahead of the US NFP report due later this Friday. The upside seems limited as the recent slump in US bond yields and hopes of Iran war de-escalation undermine the US Dollar. Moreover, a hawkish BoJ and intervention risks support the Japanese Yen, capping the pair.

Gold loses the grip; $4,000 comes next on the downside

Gold sets aside two daily advances in a row on Friday, opening the door to a potential test of the key $4,000 mark per troy ounce. The precious metal’s retracement follows a decent improvement in the sentiment surrounding the US Dollar, solid NFP data and higher US Treasury yields across the board.

Democrats win House and Senate in US midterms: Why isn’t all bad news for crypto

The biggest story this week was Tuesday’s US midterm elections, which saw Democrats win control of both the House and the Senate in a clear blue wave. This political shift in the US has triggered sharp price swings across the cryptocurrency market.

Week ahead – Inflation and geopolitics in focus as US political landscape shifts

Post-midterm election euphoria fizzles out as risk aversion prevails. US CPI, PPI and Fedspeak on the radar as Fed hike bets remain supported. Oil retreat pauses on mixed hopes about the ongoing conflicts.

US Dollar breaks below 101.50 as Democrats sweep Congress

The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.