Kiwi dollar under pressure as economic concerns weigh, despite softer US dollar
Written by
Daily Currency Update
The New Zealand dollar (NZD) remained under pressure on Wednesday, slipping for the seventh consecutive trading session as it continued to weaken against the US dollar (USD), even as the broader greenback showed signs of softness. At the time of writing, NZD/USD was trading around 0.5716, hovering near its lowest level in six months. The persistent sell-off in the NZD reflects growing investor anxiety over New Zealand’s economic outlook. Confidence has been shaken in recent weeks following the Reserve Bank of New Zealand’s (RBNZ) surprise interest rate cut last week, a move that caught many off guard and signalled a more dovish shift in policy. The central bank’s decision has stoked expectations that further monetary easing could be on the horizon, especially as economic data continues to point toward slowing growth and rising financial strain for households and businesses. Despite some softening in the US dollar—driven in part by easing Treasury yields and cautious Fed commentary—the NZD has struggled to benefit. This divergence highlights the extent of local pressures weighing on the currency, from weakening consumer sentiment to concerns over New Zealand’s housing and labour markets. Market sentiment has turned increasingly cautious, with traders reluctant to take long positions on the NZD amid signs that the RBNZ may need to prioritise economic support over inflation control. For many, the key question now is not whether the central bank will cut again, but how soon and by how much. Looking ahead, investors will be closely watching upcoming economic data out of New Zealand, including GDP figures, retail sales, and employment reports, for further clues on the health of the domestic economy and the RBNZ’s next move. Until then, the NZD may continue to face headwinds, especially if risk appetite remains subdued globally. In the meantime, the NZD remains on the defensive, struggling to find its footing in a market environment that is increasingly risk-averse and sensitive to signs of economic fragility.Key Movers
The US dollar (USD) remained on the back foot on Wednesday, as growing market confidence in a Federal Reserve (Fed) pivot toward monetary easing continued to weigh on the currency. Investors are increasingly pricing in multiple rate cuts before the end of the year, reflecting expectations that the central bank’s tightening cycle has likely peaked. According to the CME FedWatch Tool, there is now a 95.6% probability that the Fed will cut rates by a total of 50 basis points by December. Such a move would lower the federal funds target range to 3.50%–3.75%, marking a clear departure from the aggressive rate-hiking stance seen over the past two years. The shift in sentiment has been fuelled by a mix of softer US economic data and cautious commentary from Fed officials in recent weeks. Signs of cooling inflation, moderating labour market conditions, and slowing consumer demand have all contributed to growing confidence that the Fed has room to ease policy without risking a resurgence in inflation. While the central bank has yet to commit to a specific timeline for rate cuts, its recent tone has been notably more balanced. Fed Chair Jerome Powell and other policymakers have acknowledged that financial conditions have tightened meaningfully—even without recent rate hikes—as long-term bond yields and credit spreads have risen in recent months. Against this backdrop, the US dollar has lost some of its shine as traders rotate into riskier assets and seek opportunities in higher-yielding or more hawkish markets. The dollar’s retreat is also being compounded by a general improvement in risk sentiment, with equity markets holding firm and volatility indicators remaining subdued. Looking ahead, markets will closely monitor upcoming data releases—including inflation figures, retail sales, and employment reports—for further confirmation that the Fed is on track to ease policy. Until then, the US dollar may remain under pressure, particularly if incoming data continues to support the case for a policy shift.Expected Ranges
- NZD/USD: 0.5600 - 0.5800 ▲
- NZD/EUR: 0.4800 - 0.5000 ▲
- GBP/NZD: 2.3300 - 2.3500 ▼
- NZD/AUD: 1.1300 - 1.1500 ▼
- NZD/CAD: 0.7900 - 0.8100 ▲