US dollar softens as strong NZ data and fed rate cut expectations lift kiwi
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Daily Currency Update
The US dollar (USD) slipped against the New Zealand dollar (NZD) as market participants increasingly price in the likelihood of another interest rate cut by the US Federal Reserve (Fed) in December. With investors anticipating a more accommodative stance from the Fed, the greenback has come under renewed pressure, opening the door for the Kiwi to take advantage of shifting global sentiment. Adding to the NZD’s strength was a fresh round of upbeat domestic data. Statistics New Zealand released its third-quarter Retail Sales report on Thursday, showing a robust 1.9% quarter-on-quarter increase. This marks a sharp improvement from the previous reading of 0.5%, which itself had been revised down from 0.7%, and dramatically outpaced market expectations of a modest 0.6% rise. The stronger-than-forecast figures suggest consumers remain surprisingly resilient despite higher living costs and tighter financial conditions, giving New Zealand’s economy a welcomed boost. Retail Sales excluding autos mirrored this trend, also climbing 1.9% in the third quarter, up from 0.5% previously. The fact that both headline and core figures matched in strength further reinforces the idea that the improvement is broad-based rather than driven by one-off factors. In immediate response to the release, the NZD attracted fresh buying interest as traders reassessed the country’s near-term economic outlook. Sentiment was further supported by a notable rise in business confidence. According to the latest ANZ Business Outlook (ANZBO) survey for November, business confidence in New Zealand has surged to its highest level in 11 years. This is a remarkable development considering the global backdrop of uncertainty and slower growth. ANZ chief economist Sharon Zollner commented that the upswing in confidence “is rooted in an improvement in experienced activity, not just hope,” highlighting that firms are seeing tangible signs of improvement rather than merely anticipating it. The combination of strong consumer spending and a more optimistic business community paints an encouraging picture for New Zealand’s economic trajectory. While global headwinds remain and the full impact of past interest rate hikes has yet to fully filter through, the latest data indicates that domestic momentum is holding up better than expected. Meanwhile, with the Fed leaning toward further easing, the interest rate differential between the US and New Zealand could narrow in the months ahead, providing an additional tailwind for the Kiwi. Unless incoming US data forces the Fed to reconsider its position, the NZD may continue to benefit from both domestic strength and shifting global expectations.Key Movers
The US dollar (USD) continues to face downward pressure as shifting expectations around US monetary policy reshape market sentiment. Investors are increasingly convinced that the Federal Reserve (Fed) is preparing to adopt a more accommodative stance, with current pricing indicating an 84% likelihood of a 25-basis-point interest rate cut at the December meeting. This growing confidence in near-term easing has weighed on the greenback, encouraging traders to rotate toward higher-yielding or more growth-sensitive currencies. The change in market expectations follows a consistent run of data suggesting that inflation in the United States is gradually cooling and that overall financial conditions may allow the Fed to begin easing before the end of the year. As a result, investors are more cautious about holding the USD, which has benefited for much of the past year from the Fed’s tighter policy approach. The prospect of lower interest rates reduces the dollar’s yield advantage, diminishing its appeal in global currency markets. However, not all recent data has pointed toward cooling conditions. Fresh US labor market figures revealed a modest but notable improvement that could help slow the dollar’s decline. Initial Jobless Claims for the week ending November 22 fell by 6,000 to a seasonally adjusted 216,000, marking the lowest reading since April. This outcome surprised economists, who had expected claims to rise to around 225,000. The drop suggests that the US labor market remains resilient, even as broader economic momentum shows signs of easing. A stronger labor market can complicate the Fed’s policy path. While easing remains the market’s base-case scenario, the central bank continues to stress that decisions will depend on incoming data. If labor conditions remain firm or if wage pressures re-accelerate, policymakers may feel less urgency to cut rates as quickly as markets anticipate. This dynamic could help put a floor under the USD, limiting the extent of its near-term losses despite the prevailing bias toward Fed easing. For now, though, traders are focusing on the bigger picture: expectations of a December rate cut and the broader shift toward a more dovish Fed stance. As long as these expectations hold, the dollar is likely to remain on the back foot. In the coming weeks, attention will turn to key US inflation releases, employment figures and public remarks from Fed officials. Each of these will play a crucial role in shaping market assumptions and determining whether the USD can stabilise, or whether it will continue to drift lower heading into the end of the year.Expected Ranges
- NZD/USD: 0.5600 - 0.5800 ▲
- NZD/EUR: 0.4800 - 0.5000 ▲
- GBP/NZD: 2.3050 - 2.3250 ▼
- NZD/AUD: 1.1300 - 1.1500 ▲
- NZD/CAD: 0.7900 - 0.8100 ▼