NZD/USD pauses seven-day slide as US dollar weakens
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Daily Currency Update
After seven consecutive days of losses, the New Zealand dollar (NZD) finally caught a breather on Thursday, with the NZD/USD pair trading around 0.5740 during early European trading hours. This pause comes as the US dollar (USD) struggles to find direction amid ongoing trade tensions between the US and China, two of the world’s biggest economies. The recent softening of the USD has given the Kiwi a bit of room to breathe after its long slide. Trade tensions and uncertainty between the US and China are making traders cautious, leading to less aggressive moves in the currency markets. When the USD weakens, it often gives currencies like the NZD a chance to gain ground. However, the overall outlook for the New Zealand dollar remains cautious. The Reserve Bank of New Zealand (RBNZ) has been signaling a more dovish, or easing stance on monetary policy. In simple terms, this means the central bank might lower interest rates to support the economy if the data suggests it’s needed. RBNZ Chief Economist Paul Conway recently commented that the central bank is still open to the possibility of cutting rates further but will wait to see new economic data before making a decision. This cautious approach has traders pricing in another potential rate cut as soon as November. Markets are now expecting the official cash rate to fall to around 2.0% by 2026, down from current levels. Lower interest rates can reduce the attractiveness of a currency to investors, which tends to put downward pressure on the NZD over time.Key Movers
The British pound (GBP) continued its upward momentum against the US dollar (USD) on Thursday, trading around 1.3434 at the time of writing. This recovery follows a brief dip earlier in the week, when the pound fell to its lowest level in two and a half months. The rebound was supported by fresh economic data from the UK. The Office for National Statistics (ONS) reported that the country’s Gross Domestic Product (GDP) grew by 0.1% in August. While modest, this growth, combined with a 0.3% expansion over the three months leading to August, offers some reassurance after July’s figures were revised downward. These numbers suggest that Britain may narrowly avoid an economic contraction in the third quarter, providing a measure of optimism for businesses and consumers. Adding to the positive market sentiment were comments from Bank of England (BoE) policymaker Catherine Mann. She highlighted that headline inflation continues to rise, with price pressures persisting across the economy. Mann also noted that while the labour market has softened, it is not weakening sharply, a sign that the job market remains relatively stable amid economic challenges. Importantly, Mann pointed out that the recent strength of the pound could help ease inflation by making imports cheaper. However, she also warned that inflation expectations have moved away from levels consistent with the BoE’s target, emphasising the need for the central bank to remain cautious and vigilant in its future policy decisions.Expected Ranges
- NZD/USD: 0.5600 - 0.5800 ▼
- NZD/EUR: 0.4800 - 0.5000 ▼
- GBP/NZD: 2.3450 - 2.3650 ▲
- NZD/AUD: 1.1200 - 1.1400 ▼
- NZD/CAD: 0.7900 - 0.8100 ▼