The NZD/USD exchange rate has slipped to approximately 0.5940 during early trading in Asia on Thursday. This downward trend reflects prevailing bearish sentiment surrounding the New Zealand Dollar (NZD), influenced by recent market dynamics including speculations about the US presidential election. The potential victory of former President Donald Trump appears to be bolstering the US Dollar (USD), as markets react positively to his policies that tend to favor a stronger dollar.
The strengthening of the USD can also be attributed to rising US bond yields, which are being driven higher by the anticipated impact of Trump’s economic policies, including proposals for substantial tariffs on Chinese goods. Given that China is a key trading partner for New Zealand, such tariffs could have repercussions for the Kiwi, creating additional selling pressure as market participants adjust their forecasts.
As the financial landscape shifts, focus is turning to the upcoming Federal Reserve meeting where a reduction in the benchmark interest rate by 25 basis points is widely expected. Investors are particularly keen to hear from Fed Chair Jerome Powell during the press conference that will follow, as any insights regarding future rate adjustments could significantly influence market sentiment. Markets are currently pricing in another rate cut in December, with expectations of a hold in January before a series of cuts might commence through 2025.
On the other side of the Pacific, the Reserve Bank of New Zealand (RBNZ) is facing pressure to reduce interest rates further in response to sluggish economic growth. Market analysts anticipate that the RBNZ will implement a notable cut, possibly by 50 basis points, in its next meeting scheduled for November 27, with an even larger cut of 75 basis points not being ruled out. This anticipated aggressive reduction could further weigh on the Kiwi as traders adjust their positions ahead of these central bank decisions.
