Kiwi dollar slides for sixth day as trade tensions and rate cut weigh
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Daily Currency Update
The New Zealand Dollar (NZD) continued its sharp decline against the US Dollar (USD) on Tuesday, marking its sixth straight day in the red and extending losses to fresh five-month lows. The NZD/USD pair broke decisively below the key psychological US$0.5700 level, touching a session low of US$0.5684 as global risk sentiment deteriorated and policy headwinds persisted. A key factor behind the Kiwi's weakness is the resurfacing of trade tensions between the United States and China — two of New Zealand’s most important trading partners. With geopolitical unease growing over the potential for renewed tariffs or other restrictions, risk-sensitive currencies like the NZD have come under sustained pressure. Investors are increasingly steering toward safe-haven assets, favoring the US Dollar amid uncertainty over the global economic outlook. Adding to the NZD's downside momentum is the growing divergence in monetary policy between the Reserve Bank of New Zealand (RBNZ) and the US Federal Reserve. While the Fed has maintained a higher-for-longer stance to combat sticky inflation, the RBNZ caught markets off guard recently by slashing its Official Cash Rate (OCR) by 50 basis points — a larger-than-expected move aimed at providing support to a slowing domestic economy. The aggressive rate cut, which brought the benchmark rate down to its lowest level in over a year, has raised concerns about the underlying strength of New Zealand’s economy. It also widened the yield gap between US and New Zealand government bonds, further undermining the Kiwi’s appeal to foreign investors. Despite signs of easing inflationary pressures in New Zealand, growth remains sluggish, and the RBNZ’s dovish tone suggests that further monetary stimulus may be on the table if economic conditions continue to deteriorate. The central bank has also signaled that it is closely monitoring global developments — particularly trade dynamics — which could weigh heavily on exports, tourism, and business confidence. Looking ahead, traders will be watching for any fresh signals from the RBNZ, as well as economic data out of both the US and China, for clues on the pair’s next move. In the short term, the path of least resistance appears to be lower for NZD/USD, especially if risk appetite remains subdued and the US Dollar retains its safe-haven bid. With the pair now trading at levels not seen since May, the next key support zone lies around US$0.5650, while resistance is likely to emerge near the broken US$0.5700 handle.Key Movers
Federal Reserve Chair Jerome Powell offered a measured and mostly neutral assessment of the U.S. economy during his speech and subsequent Q&A session in Philadelphia on Tuesday, signaling no major shift in the central bank's near-term policy outlook. Speaking at an event focused on the economic outlook, Powell acknowledged that recent data suggests the U.S. economy “may be on a somewhat firmer trajectory than expected,” but stopped short of signaling any change in the Fed’s cautious, data-dependent approach. He reiterated that monetary policy decisions will continue to be made “meeting by meeting,” emphasizing the Fed’s commitment to staying flexible amid a mixed economic backdrop. Following Powell’s remarks, market expectations for a rate cut at the Fed’s upcoming October 29 policy meeting remained firmly in place. According to futures pricing, traders are assigning a 96% probability to a 25-basis-point rate cut — suggesting that investors interpreted his comments as neither more hawkish nor more dovish than before. Powell noted that the overall economic picture has not changed significantly since the Federal Open Market Committee’s (FOMC) last meeting in September. “Based on the data we have, the outlook for employment and inflation does not appear to have changed much,” he said. Still, he acknowledged a slight upward revision in the Fed’s view of current economic strength, saying that “economic activity might be somewhat firmer than previously expected.” At the same time, Powell cautioned that risks to both the labor market and inflation remain on the radar. While job growth has been resilient, recent indicators suggest that labor market conditions may be softening at the margins. “We are also seeing signs that inflationary pressures, while moderating, are still a concern,” he added. The Fed chair’s comments reflect a central bank walking a fine line — aiming to support the economy without prematurely declaring victory over inflation. His careful messaging suggests the Fed is content to hold its current stance while continuing to evaluate incoming data. Market participants will now turn their focus to upcoming economic releases — including the latest retail sales, jobless claims, and inflation prints — for further clues on the Fed’s policy direction ahead of the October meeting.Expected Ranges
- NZD/USD: 0.5600 - 0.5800 ▼
- NZD/EUR: 0.4800 - 0.5000 ▼
- GBP/NZD: 2.3250 - 2.3450 ▲
- NZD/AUD: 1.1200 - 1.1400 ▼
- NZD/CAD: 0.7900 - 0.8100 ▼