The NZD/USD currency pair faces downward pressure as the Reserve Bank of New Zealand (RBNZ) plans to implement another significant rate cut in November, expected to be around 50 basis points. Traders are also considering the possibility of an even steeper cut of 75 basis points. Currently, the pair hovers near the 0.5980 level in the Asian session following two consecutive days of losses. The outlook for the New Zealand Dollar (NZD) appears grim as market sentiment remains cautious ahead of the RBNZ’s final policy announcement of the year.
A potential upside for the NZD could arise from developments in China, New Zealand’s largest trading partner. Recently, the Vice Minister of Finance in China revealed strategies aimed at introducing countercyclical adjustments in macroeconomic policies to enhance economic recovery by the end of the year. Positive results from these initiatives could lend support to the NZD, particularly if investor confidence in China’s economy rises.
Analysts have noted that, although there hasn’t been a notable increase in momentum for the NZD, its weakness is yet to stabilize. If the New Zealand Dollar fails to maintain levels above 0.6010, it risks declining below 0.5970, with the critical next support level to watch being around 0.5950.
Meanwhile, the US Dollar (USD) is experiencing strength due to favorable economic data, reinforcing predictions of interest rate cuts by the Federal Reserve in the near term. Market tools indicate a high likelihood of a 25-basis-point cut in November, while expectations for a 50-basis-point cut appear less likely.
Investors are keenly awaiting upcoming data releases, including the preliminary Q3 Gross Domestic Product (GDP) figures from the United States and the October Nonfarm Payrolls report, which are anticipated to provide insights into the timing and magnitude of the Fed’s impending rate adjustments. Additionally, the market will keep a close eye on China’s PMI data scheduled for release later in the week.
