The NZD/USD pair is experiencing a bearish trend, trading around 0.5890 during the early hours of Tuesday’s Asian session. The pair is slipping as the US Dollar consolidates, following a shift in market expectations regarding future interest rate cuts by the US Federal Reserve. Later in the day, investors will focus on the upcoming US Building Permits and Housing Starts data for October, which could influence market sentiment.
The US Dollar Index (DXY), which assesses the value of the dollar against several major currencies, has retraced from a one-year peak above 107.00 to approximately 106.20. This pullback may be limited, as market participants anticipate fiscal policies from the incoming administration that could involve tax reductions and increased tariffs. Such measures might lead to heightened inflation, potentially affecting the trajectory of interest rate cuts from the Federal Reserve.
Comments from the Boston Federal Reserve president highlighted the possibility of pausing rate reductions as early as December, contingent on forthcoming employment and inflation data. Current market speculation, as indicated by the CME FedWatch Tool, suggests there is about a 58.7% chance of a 25 basis point cut from the Fed during the December meeting.
On the New Zealand side, growing expectations of significant interest rate cuts from the Reserve Bank of New Zealand (RBNZ) are exerting downward pressure on the Kiwi dollar. Analysts predict that the RBNZ will announce a 50 basis point cut at its meeting next week on November 27. This forecast aligns with previous communications from the RBNZ, as well as the expectations set by economists and market dynamics. Recent data has presented a mixed picture, but it appears unlikely to disrupt the anticipated cuts.
