The NZD/USD currency pair is trading at approximately 0.6165 in the early stages of the Asian session on Monday. Traders have adjusted their expectations following positive Non-Farm Payroll (NFP) data from the United States, which has diminished the likelihood of a 50 basis point rate cut by the Federal Reserve at its upcoming November meeting. Meanwhile, the Reserve Bank of New Zealand (RBNZ) is expected to announce another cut to the Official Cash Rate (OCR) this Wednesday.
The strength of the US dollar is putting pressure on the NZD/USD pair, spurred by robust employment figures that indicate improving labor market conditions. These favorable conditions in the US economy are likely to bolster negotiations regarding rate cuts by the Fed, as markets now anticipate a 97.4% chance of a 25 basis point reduction in their next two meetings, a significant rise from only 31.1% prior to the release of the NFP data.
Recent statements from officials suggest a cautious outlook from the Federal Reserve. There is a consensus that interest rates may need to decrease significantly over the next year and a half, reflecting an aim to avoid maintaining the current restrictive monetary stance, even as inflation approaches the 2% target with a stable labor market.
On the other side, the RBNZ’s easing cycle began in August with an initial cut of 25 basis points, setting the OCR at 5.25%. Analysts predict that the RBNZ will continue this trend, expected to implement further cuts in its meeting later this week. Forecasts suggest that the central bank may deliver two more aggressive cuts of 50 basis points each during the fourth quarter of 2024, potentially lowering the OCR down to 4.25% by the end of that year. Expectations for substantial rate reductions continue into 2025, indicating a potential OCR of 3% by year’s end.
