The New Zealand Dollar (NZD) has experienced a decline, dipping close to 0.5970 in early trading on Monday. This slide is attributed to market expectations of a slower pace of interest rate cuts from the US Federal Reserve, which has strengthened the US Dollar. Despite the weakening NZD, potential fresh stimulus measures from China may help mitigate its losses.
The USD Index, which measures the performance of the US Dollar against a basket of other currencies, is currently hovering around a three-month high of 104.50. Market researchers suggest a significant probability — approximately 97.7% — that the Fed will implement a 25 basis point cut in November, reflecting strong sentiment regarding US monetary policy.
Recent economic data released by the US Census Bureau indicates a 0.8% decline in Durable Goods Orders for September, outperforming expectations of a larger 1.0% drop. Additionally, when transportation sector orders are excluded, there was a moderate increase of 0.4%. Consumer confidence also took a positive turn, with the University of Michigan’s Consumer Sentiment Index climbing to 70.5 in October, marking its highest level in six months and surpassing previous and forecasted figures.
In contrast, the Reserve Bank of New Zealand has already reduced its Official Cash Rate (OCR) twice this year, first in August and then again in October. Analysts anticipate that the RBNZ will enact another 50 basis point reduction at its upcoming monetary policy meeting at the end of November, with some market participants speculating about a potential 75-point cut. This outlook is contributing to the downward pressure on the NZD against the USD.
Attention is now turning to new stimulus initiatives from Chinese authorities, with expectations that these measures could enhance economic recovery as the year concludes. China’s Vice Minister of Finance highlighted the intent to implement countercyclical macroeconomic adjustments to support growth, which is particularly relevant for New Zealand given its strong trading ties with China. Positive indications from China could provide a much-needed boost for the New Zealand Dollar.
