Kiwi dollar extends decline ahead of key labour data, geopolitical tensions in focus
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Daily Currency Update
The New Zealand dollar (NZD) remained under pressure on Monday, with the NZD/USD pair extending its decline for a fourth consecutive session. The pair was last seen trading around US$0.5720 during European hours, as renewed concerns over global growth and potential US–China tensions dampened risk appetite.Despite some encouraging domestic data, the Kiwi has struggled to gain traction. New Zealand’s seasonally adjusted building permits rose 7.2% month-on-month (MoM) in September, following a 6.1% increase in August. This marks the third straight month of growth, suggesting a modest recovery in the housing sector. However, the upbeat construction figures have done little to offset broader market caution ahead of this week’s third-quarter labour market data, which could prove pivotal for the Reserve Bank of New Zealand (RBNZ) policy outlook.
Economists expect the upcoming jobs report to show a slight cooling in employment growth and a possible uptick in the unemployment rate. While the RBNZ has maintained a firm stance on keeping interest rates at restrictive levels to tame inflation, any signs of weakening labour conditions could reinforce the view that the tightening cycle has peaked. Traders will be watching closely for indications that might influence the timing of the central bank’s next policy move.
On the global front, risk sentiment has been clouded by the potential for renewed US–China trade frictions, which continue to weigh on commodity-linked and risk-sensitive currencies like the Kiwi. Meanwhile, the USD found modest support at the start of the week as markets digest recent remarks from Federal Reserve officials, who reiterated the need to keep rates elevated for longer amid persistent inflation concerns. From a technical perspective, NZD/USD faces immediate support near US$0.5700, with a deeper decline potentially targeting the US$0.5660 area.
On the upside, resistance is seen around US$0.5760–US$0.5780, where selling pressure is likely to re-emerge unless broader risk sentiment improves. In summary, the NZD remains on the defensive as investors weigh softening global demand, geopolitical risks and the domestic labour market outlook. With key employment data due later in the week, volatility could increase as traders reassess the RBNZ’s policy path and the near-term trajectory for the Kiwi.
Key Movers
The US dollar (USD) lost momentum on Monday after fresh data pointed to continued weakness in the American manufacturing sector. The Institute for Supply Management (ISM) reported that US factory activity contracted for the eighth consecutive month in October, reinforcing signs that the industrial economy remains under pressure despite resilience elsewhere.The ISM Manufacturing PMI fell to 48.7, undershooting market expectations of 49.5 and staying below the 50.0 threshold that separates expansion from contraction. The details of the report were mixed: Production slipped to 48.2, Employment edged slightly higher to 46.0, while Prices Paid eased to 58.0, suggesting some relief on cost pressures. Overall, the data highlighted ongoing softness in new orders and output, underscoring the challenges faced by US manufacturers amid high borrowing costs and slowing global demand.
In contrast, a separate reading from S&P Global painted a somewhat more upbeat picture. Its final US Manufacturing PMI for October came in at 52.5, up from 52.0 in September, indicating modest growth in factory activity according to a different survey methodology. Following the mixed reports, the US Dollar Index (DXY), which measures the Greenback’s performance against a basket of six major peers, slipped from earlier highs. The Index was last seen hovering around 99.83, down from an intraday peak of 99.99, as investors reassessed the outlook for US growth and monetary policy.
The softer ISM data reinforced expectations that the Federal Reserve is likely to maintain its current policy stance, keeping interest rates steady while monitoring incoming data for signs of cooling inflation and demand. Market participants will now turn their attention to upcoming labour market and inflation figures later in the week for further direction on the USD.
While the Greenback remains supported by its safe-haven appeal and relatively high yields, the latest data suggest that its recent rally may be running out of steam as economic momentum moderates.
Expected Ranges
- NZD/USD: 0.5600 - 0.5800 ▼
- NZD/EUR: 0.4850 - 0.5050 ▲
- GBP/NZD: 2.2900 - 2.3100 ▲
- NZD/AUD: 1.1350 - 1.1550 ▼
- NZD/CAD: 0.7900 - 0.8100 ▼