The New Zealand Dollar (NZD) is facing downward pressure, approaching the 0.5880 level during the Asian trading session on Tuesday. This decline has been influenced by the recently voiced threats of additional tariffs by the US President-elect, which have alarmed traders. Market participants are also eagerly awaiting the release of the US Job Openings and Labor Turnover Survey (JOLTs) for October. In addition, speeches from Federal Reserve officials are expected to provide further insights into monetary policy direction.
On Monday, Federal Reserve representatives stressed the importance of continuing to reduce interest rates throughout the upcoming year. However, there was no definitive commitment to a rate cut at the next scheduled meeting in mid-December. One prominent Fed official expressed a willingness to support a reduction in borrowing costs, depending on economic indicators released prior to the meeting.
In the realm of US manufacturing, the Institute for Supply Management (ISM) reported a slight improvement in conditions for November, yet the sector still remains in contraction territory. The ISM Manufacturing Purchasing Managers Index (PMI) climbed to 48.4, an increase from October’s 46.5, and surpassed the anticipated figure of 47.5. This data reflects ongoing challenges within the manufacturing landscape.
The upcoming Nonfarm Payrolls (NFP) report, set to release on Friday, is expected to shed light on the state of the labor market and influence the outlook for US interest rates. Analysts project that approximately 195,000 jobs were added in November, which could impact market sentiment significantly.
In a broader context, the implications of potential trade policy shifts under Trump are concerning for New Zealand. Proposed tariffs, including a 25% levy on imports from Canada and Mexico, along with a 10% tariff on goods from China, could escalate into a global trade war. Such developments pose risks for the NZD, given China’s pivotal role as a trading partner for New Zealand.
