Kiwi dollar dips as weak GDP data fuels speculation of further RBNZ rate cuts
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Daily Currency Update
The NZDUSD pair faced renewed selling pressure following a modest rebound during the Asian session, where it briefly climbed to around US$0.5865, before turning lower for the second consecutive day on Wednesday. Currently, the pair is trading in the mid-0.5800s, remaining close to the three-week low it touched on Monday. This downward pressure is largely attributed to a broadly stronger US Dollar (USD), which continues to weigh on the New Zealand Dollar (NZD). Adding to the NZD’s challenges are growing market expectations for further interest rate cuts by the Reserve Bank of New Zealand (RBNZ). These expectations have been reinforced by the release of disappointing GDP data last week. According to Statistics New Zealand, the economy contracted by 0.9% on a quarterly basis in the second quarter, reversing the 0.8% growth seen in the March quarter and falling short of economists’ forecasts for a 0.3% decline. The unexpected economic contraction has intensified concerns about the health of New Zealand’s economy and has bolstered speculation that the RBNZ may ease monetary policy more aggressively to support growth. This bearish outlook continues to weigh heavily on the NZDUSD pair, contributing to its offered tone amid the broader market dynamics. Investors will be closely monitoring upcoming economic data and RBNZ communications for further signals on the central bank’s policy direction, which could influence the NZD’s near-term trajectory against the USD.Key Movers
The US Dollar Index (DXY), which tracks the value of the US Dollar (USD) against a basket of six major currencies, is gaining momentum after two consecutive days of declines. During Wednesday’s Asian trading session, the index hovered around the 97.30 level as market participants await key upcoming economic data that could set the tone for the dollar’s near-term direction. Investors are closely watching the release of the US Q2 Gross Domestic Product (GDP) Annualised figure and the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred measure of inflation, both scheduled for later this week. These reports are expected to provide crucial insights into the strength of the US economy and inflationary pressures, potentially influencing the Federal Reserve’s future monetary policy decisions. Adding to the cautious sentiment, the flash reading of the S&P Global Purchasing Managers’ Index (PMI) revealed a slowdown in US business activity in September. The Composite PMI declined to 53.6 from 54.6 in August, indicating that growth in the private sector is losing steam. Both manufacturing and services sectors showed signs of easing momentum, with the Manufacturing PMI slipping to 52.0 from 53.0, pointing to a gradual deceleration in factory output and orders. Similarly, the Services PMI decreased to 53.9 from 54.5, suggesting that demand in the services sector may be moderating. Taken together, these indicators highlight a private sector that is facing challenges in maintaining its earlier growth pace amid a backdrop of ongoing economic uncertainties. As traders await the GDP and PCE data, the US Dollar Index’s movements will likely reflect shifting expectations around economic growth and inflation, and by extension, the Federal Reserve’s policy path.Expected Ranges
- NZD/USD: 0.5700 - 0.5900 ▼
- NZD/EUR: 0.4850 - 0.5050 ▼
- GBP/NZD: 2.3100 - 2.3300 ▲
- NZD/AUD: 1.1200 - 1.1400 ▼
- NZD/CAD: 0.8000 - 0.8200 ▲