Kiwi dollar retreats from highs but supported by easing US-China tensions
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Daily Currency Update
The New Zealand Dollar (NZD) struggled to hold above two-week highs on Wednesday, retreating modestly after briefly rising past the US$0.5755 level. Despite the pullback, the NZD remains in positive territory for the day, supported by a solid bounce from technical support near US$0.5700 on Tuesday. Investor sentiment toward the NZD continues to be buoyed by easing tensions between the United States and China—a key development for the trade-sensitive New Zealand economy. Often viewed as a "China-proxy" currency due to New Zealand’s strong trade ties with the region, the NZD tends to benefit when confidence around Chinese economic prospects improves. Contributing to this renewed optimism are remarks from US President Donald Trump, who struck a conciliatory tone ahead of his expected meeting with Chinese President Xi Jinping in South Korea next week. Trump expressed hope for a “fair deal,” signalling a potential thaw in bilateral relations that had weighed heavily on global risk sentiment in recent months. Meanwhile, the US Dollar (USD) remains under pressure, as market participants increasingly price in the likelihood of back-to-back interest rate cuts by the Federal Reserve. Softer US economic data and dovish commentary from Fed officials have fuelled expectations that the central bank could ease policy in the near term to support growth. This has further weighed on the USD, providing an additional tailwind for the NZD. Looking ahead, traders will keep a close eye on further developments in US-China relations, as well as upcoming US economic data that could influence Fed policy expectations. For now, the NZDUSD pair appears to be finding support from both improving risk sentiment and a softer US Dollar backdrop.Key Movers
The British Pound (GBP) came under renewed selling pressure on Wednesday, falling sharply against its major counterparts following the release of softer-than-expected UK inflation data for September. The report dampened expectations for further interest rate hikes by the Bank of England (BoE) and reinforced the view that policy tightening may have peaked. According to the latest figures from the Office for National Statistics (ONS), the UK’s core Consumer Price Index (CPI)—which strips out volatile items such as food, energy, alcohol, and tobacco—rose by 3.5% year-on-year, undershooting both the market forecast of 3.7% and the previous reading of 3.6%. The moderation in core inflation signals that underlying price pressures are continuing to ease, albeit gradually. Meanwhile, headline CPI inflation also came in below expectations, rising by 3.8% annually compared to the 4.0% forecast. On a month-over-month basis, consumer prices were unchanged, following a 0.3% increase in August. The flat monthly figure adds to the growing evidence that inflationary momentum is cooling across the UK economy. Notably, services inflation—a key gauge closely monitored by the Bank of England due to its sensitivity to wage growth—remained steady at 4.7%. While still elevated, the lack of acceleration in services prices may offer some reassurance to policymakers that inflation risks are gradually subsiding. The softer inflation print comes at a critical time for the UK economy, which is grappling with sluggish growth, tight financial conditions, and signs of strain in the labour market. The Bank of England held interest rates steady in its last meeting and has signalled a cautious, data-dependent approach going forward. In the wake of the inflation data, markets have pared back bets on further tightening, with swap pricing suggesting the BoE is likely at the end of its hiking cycle. As a result, the pound weakened across the board, notably against the US dollar and the euro, as investors reassessed the UK’s monetary policy outlook.Expected Ranges
- NZD/USD: 0.5600 - 0.5800 ▼
- NZD/EUR: 0.4850 - 0.5050 ▼
- GBP/NZD: 2.3200 - 2.3400 ▲
- NZD/AUD: 1.1200 - 1.1400 ▼
- NZD/CAD: 0.7900 - 0.8100 ▲