Kiwi dollar softens despite improving New Zealand business confidence
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Daily Currency Update
The New Zealand dollar (NZD) edged lower against the U.S. dollar (USD) on Thursday, with the NZD/USD pair trading around 0.5740, down 0.37% on the day at the time of writing. The decline comes after the pair briefly tested a key resistance area near 0.5800 on Wednesday, before retreating as the Greenback regained strength amid a firmer global risk tone. Despite the short-term pullback, the medium-term outlook for the Kiwi remains relatively constructive, supported by signs of improving domestic sentiment and stabilising economic conditions. The October ANZ Business Outlook survey indicated a notable rebound in confidence, underscoring that business sentiment is gradually recovering. According to the report, Business Confidence rose to 58.1 in October, marking its highest level in eight months, up from 49.6 in September. The Activity Outlook—a key measure of future economic momentum—also improved to 44.6, reaching a six-month high. Meanwhile, past activity, often viewed as a reliable proxy for Gross Domestic Product (GDP) growth, held steady at 5, suggesting that underlying activity remains resilient. However, the Kiwi’s advance remains capped as global market dynamics continue to favour the U.S. dollar. The Greenback’s strength has been underpinned by improving trade relations between the United States and China following recent diplomatic developments. Investors are also awaiting key U.S. data releases, including the upcoming Nonfarm Payrolls (NFP) report, which could further influence USD direction and broader risk sentiment. Domestically, traders remain cautious ahead of next week’s Reserve Bank of New Zealand (RBNZ) policy meeting. Although the central bank is widely expected to keep rates on hold, investors will closely monitor the statement for updated guidance on inflation and growth prospects. A more hawkish tone from the RBNZ could lend support to the NZD, while any dovish hints might reinforce downside risks for the currency. From a technical perspective, NZD/USD faces immediate support around 0.5720, followed by 0.5680. On the upside, the 0.5800 level remains a significant resistance zone; a sustained break above this barrier could open the way toward 0.5850 and potentially 0.5900. Overall, while improving domestic business confidence offers a degree of support for the New Zealand dollar, broader market forces—particularly the direction of the U.S. dollar and global risk appetite—are likely to dictate the near-term trajectory of the NZD/USD pair.Key Movers
The U.S. dollar (USD) strengthened for a second consecutive session on Thursday, supported by hawkish remarks from Federal Reserve Chairman Jerome Powell and growing uncertainty surrounding the next phase of the Sino–U.S. trade deal. The U.S. Dollar Index (DXY), which measures the Greenback’s performance against a basket of major currencies, climbed to around 99.25 during the European session, extending Wednesday’s advance. The dollar’s renewed strength followed a volatile reaction to the Federal Reserve’s policy decision late Wednesday. As widely expected, the Fed delivered a 25 basis-point rate cut, bringing the target range for the federal funds rate to 3.75%–4.00%, and formally announced the end of its quantitative tightening program. Initially, the market response was muted, as the move had been largely priced in. However, sentiment shifted sharply following Powell’s post-meeting press conference. Powell emphasised that while the latest rate reduction was designed to support the economy amid global uncertainty, policymakers are not on a pre-set course for further easing. He cautioned that a December rate cut is “far from a foregone conclusion,” citing mixed economic signals. Strong labor market data continue to contrast with sluggish inflation and uneven business investment, leaving the Federal Open Market Committee (FOMC) divided on the appropriate path forward. The Chairman’s comments were widely interpreted as a hawkish pivot, suggesting that the Fed may pause to assess the impact of previous rate cuts before taking additional action. Investors reacted by trimming expectations for further easing in 2025, prompting a sharp uptick in U.S. Treasury yields and lending renewed support to the dollar. Meanwhile, market participants are also weighing the implications of the Sino–U.S. trade accord, announced earlier this week following talks between Presidents Donald Trump and Xi Jinping on the sidelines of the APEC summit in South Korea. While the agreement included tariff reductions and renewed Chinese commitments to purchase U.S. agricultural goods, analysts remain cautious about its long-term durability and the enforcement mechanisms in place. Risk sentiment remains fragile as traders look for more concrete details on implementation. The combination of Fed caution and lingering trade uncertainty has favoured the Greenback as investors rotate into safer assets. Looking ahead, the dollar’s near-term trajectory will likely hinge on incoming U.S. data, particularly Friday’s Nonfarm Payrolls (NFP) report and next week’s inflation figures. A stronger-than-expected labor print could reinforce the Fed’s hawkish tone and extend the dollar’s gains, while any signs of weakness might revive expectations for further policy easing in early 2025.Expected Ranges
- NZD/USD: 0.5650 - 0.5850 ▼
- NZD/EUR: 0.4850 - 0.5050 ▼
- GBP/NZD: 2.2800 - 2.3000 ▲
- NZD/AUD: 1.1300 - 1.1500 ▼
- NZD/CAD: 0.7950 - 0.8150 ▼