The NZD/USD currency pair has shown stability, influenced by recent positive developments in China’s manufacturing sector. China, New Zealand’s primary trading partner, reported an increase in the Caixin Manufacturing PMI, which rose to 50.3 in October from 49.3 in September, surpassing expectations. This uptick in factory activity may provide a supportive backdrop for the New Zealand Dollar as it continues to trade around the 0.5980 level during Asian trading hours on Friday.
The New Zealand construction sector also displayed signs of growth, with statistics indicating a 2.6% month-on-month rise in new building permits for September, following a decline of 5.3% in August. Despite this encouraging data, the NZD is likely facing headwinds due to speculation regarding the Reserve Bank of New Zealand’s (RBNZ) future policy direction. With inflation having returned to the central bank’s target range, there are growing expectations of a dovish tilt, particularly as markets have already priced in a 50 basis point rate cut anticipated for November. Projections suggest a decrease in the cash rate from 4.75% to 3.82% by year-end.
On the other hand, the US Dollar ended a four-day decline amidst continuing market uncertainty as the upcoming presidential election looms. Despite this rebound, the Greenback has struggled following recent economic data that showed core inflation, as measured by the Personal Consumption Expenditures (PCE) Price Index, rose by 2.7% year-over-year in September. Meanwhile, initial jobless claims dropped to a five-month low of 216,000 for the week ending October 25, highlighting a robust labor market and tempering expectations for near-term rate cuts by the Federal Reserve.
Market participants are looking forward to the Nonfarm Payrolls report due on Friday, with forecasts suggesting that the US economy added 113,000 jobs in October, while the unemployment rate is expected to remain steady at 4.1%.
