The NZD/USD currency pair is experiencing slight gains, trading around 0.5900 in the early hours of Thursday’s Asian session. The ongoing cautious approach by the Federal Reserve regarding future interest rate cuts may provide some upward momentum for the US Dollar, while potential tariffs on Chinese imports could create headwinds for the New Zealand Dollar.
As trading began on Thursday, the NZD/USD gained ground, supported by a weaker US Dollar. The Greenback has softened slightly due to month-end liquidity adjustments and profit-taking ahead of the US Thanksgiving holiday, during which the markets will be closed. Despite this temporary weakness in the US Dollar, the potential for a more restrained monetary policy approach from the Federal Reserve is likely to limit its downward trajectory.
Recent data revealing the Personal Consumption Expenditures (PCE) Price Index indicated a rise of 2.3% year-over-year in October, up from 2.1% in September. The core PCE Price Index, which excludes more volatile food and energy prices, increased to 2.8%, reflecting a similar trend. These results align with market predictions and hint that the Federal Reserve may proceed with caution regarding rate cuts, especially considering inflation trends and uncertainties relating to trade policies.
Amid these developments, the Reserve Bank of New Zealand recently announced a reduction in its Official Cash Rate (OCR) by 50 basis points to 4.25% during their November meeting. The central bank’s governor mentioned that this decision aligns with forecasts indicating another possible cut in February 2025, conditional on the economic outlook. Furthermore, the looming threat of tariffs from the US could pressure the Kiwi, given that China is New Zealand’s largest trading partner and any trade disruptions could impact economic conditions.
