The NZD/USD currency pair has continued its downward trend, falling for a third consecutive day and approaching the 0.5870 level, which reflects a three-month low observed during Thursday’s trading session in Asia. The decline is primarily attributed to the strengthening of the US Dollar, which is experiencing a boost from investor sentiment known as “Trump trades” and less dovish comments from Federal Reserve officials following the recent US inflation report.
Supporting the dollar’s ascent is the US Dollar Index (DXY), which remains stable at approximately 106.60, a peak not seen since November 2023, bolstered by increasing US Treasury yields. Current yields for the 2-year and 10-year Treasury notes are reported at 4.31% and 4.47%, respectively.
Recent statements from Federal Reserve officials indicate a cautious approach towards monetary policy adjustments. For instance, St. Louis Fed President noted that persistent inflationary pressures complicate the likelihood of rate cuts. Emphasizing the strength of the US labor market, officials aim to address worries regarding inflation’s durability despite the Fed’s attempts to control it. Similarly, Kansas City Fed President referred to possible obstacles that could impede the process of lowering interest rates.
In October, the US Consumer Price Index (CPI) experienced a year-over-year increase of 2.6%, aligning with market expectations and reflecting a slight rise from 2.4% in the previous month. The core CPI, which excludes volatile food and energy prices, also saw an increase of 3.3%, matching forecasts.
In New Zealand, expectations mount for a significant rate cut from the Reserve Bank of New Zealand (RBNZ), projected to be around 75 basis points later this month, as inflation rates decrease to their lowest since the first quarter of 2021. Despite this, the Food Price Index recorded a steady year-over-year rate of 1.2% in October, representing the highest level since February, although monthly food prices saw a decline.
Market attention is now shifting toward the release of the US Producer Price Index (PPI) data for October, while traders also await significant economic indicators from China, New Zealand’s largest trading partner, including data on Industrial Production and Retail Sales due out on Friday.
