- NZD/USD drifts lower for the fifth straight day and drops to over a one-week low on Friday.
- The disappointing domestic data and China’s economic woes exert pressure on the Kiwi.
- Bets that the Fed is not done raising rates underpin the USD and contribute to the decline.
The NZD/USD pair attracts fresh sellers following an intraday move up to the 0.5935-0.5940 region and drops to over a one-week low during the Asian session on Friday. Spot prices, however, manage to rebound a few pips in the last hour and currently trade just below the 0.5900 mark, down nearly 0.15% for the day.
The New Zealand Dollar (NZD) meets with some supply in reaction to the dismal domestic data, which showed that business activity in the manufacturing sector contracted further in October. The latest Business NZ Performance of Manufacturing Index (PMI) fell significantly from 45.1 in September to 42.5 – marking the lowest level of activity for a non-COVID-affected month since May 2009. The data reaffirmed expectations that the Reserve Bank of New Zealand (RBNZ) will keep its policy rate unchanged in November. Apart from this, persistent worries about the worsening economic conditions in China exert additional pressure on antipodean currencies, including the Kiwi.
The US Dollar (USD), on the other hand, holds steady near the weekly high touched on Thursday and remains well supported by reviving bets for at least one more interest rate hike by the Federal Reserve (Fed). The bets were lifted by the recent hawkish comments by several Fed officials, acknowledging the US economic resilience. Adding to this, Fed Chair Jerome Powell noted that policymakers are encouraged by the slowing pace of inflation but are not sure that the monetary policy is sufficiently restrictive to keep the momentum going. This, along with a weak auction of 30-year Treasury bonds, continues to push yields higher across all maturities and underpins the buck.
Apart from this, a generally softer tone around the equity markets turns out to be another factor benefitting the safe-haven buck and contributing to driving flows away from the perceived riskier Kiwi. This, in turn, suggests that the path of least resistance for the NZD/USD pair is to the downside and supports prospects for an extension of this week's rejection slide from the 0.6000 psychological mark, or over a three-week high touched on Monday. Traders now look to the release of the Michigan Consumer Sentiment Index for some impetus later during the North American session.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds steady at around 1.0750 ahead of this week's key events
EUR/USD continues to trade sideways at around 1.0750 on Monday. The cautious market mood helps the US Dollar (USD) hold its ground as investors gear up for key macroeconomic data releases and central bank meetings of this week.
GBP/USD retreats toward 1.2550 from daily highs
GBP/USD lost its traction and retreated to the 1.2550 area after rising toward 1.2600 in the European session. October labor market data from the UK and November inflation data from the US will be released on Tuesday ahead of the Fed's and the BoE's policy meetings.
Gold extends daily slide toward $1,980 Premium
Gold price remains under heavy bearish pressure and trades at its lowest level in nearly three weeks at around $1,980. The benchmark 10-year US Treasury bond yield is up more than 1% on the day, weighing on XAU/USD ahead of this week's key macroeconomic events.
Bitcoin braces for volatility-filled week with November CPI data release, Fed decision
Bitcoin is likely to experience heightened volatility this week with the upcoming release of November CPI data. BTC price suffered a correction of nearly 4% in the past 24 hours, ahead of the key macroeconomic events scheduled for the week.
Big week ahead for commodities with FOMC, ECB and BOE in focus – What's next?
The most highly anticipated week of the year and quite possibly the most pivotal moment in monetary policy history is finally here – as central banks from Washington to Frankfurt to London and beyond prepare to deliver their final interest rate decisions of 2023.