Kiwi dollar softens as markets brace for another RBNZ rate cut
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Daily Currency Update
The New Zealand dollar (NZD) is struggling to hold early gains against the US dollar (USD), with NZD/USD slipping back toward 0.5589 at the time of writing. The Kiwi remains under steady pressure as traders position themselves ahead of next week’s Reserve Bank of New Zealand (RBNZ) policy meeting, where another interest rate cut is all but fully priced in. Expectations of further easing have become increasingly entrenched following October’s surprise 50-basis-point cut, which signalled a clear shift in the central bank’s stance as economic headwinds intensify. Since then, a run of softer data has strengthened the market’s conviction that more stimulus will be needed. Inflation expectations have continued to ease, business confidence remains fragile, and domestic demand is showing little sign of recovery. Together, these dynamics paint a picture of an economy in need of additional support, and the RBNZ appears poised to deliver. The looming decision has left the Kiwi vulnerable, especially as investors weigh the possibility that New Zealand’s rate-cut cycle may extend into early next year. While some analysts note that aggressive early easing could help stabilise economic conditions sooner, others caution that widening interest-rate differentials with the United States may keep NZD/USD under pressure in the near term. With the Federal Reserve maintaining a more measured path and US yields still relatively elevated, the Kiwi’s yield disadvantage remains a drag on sentiment. Before the policy meeting, traders will turn their attention to Friday’s release of New Zealand’s October trade data. The figures on exports, imports, and both the monthly and annual trade balance could offer fresh insight into how global demand and domestic conditions are feeding through to the real economy. Any signs of further deterioration may reinforce expectations for a dovish RBNZ, while a more resilient showing could provide the currency with some temporary relief. Across the Pacific, US data will also play a key role in shaping NZD/USD direction. Markets are awaiting the S&P Global flash PMIs for November, which will give an updated view of activity in the manufacturing and services sectors. Later in the session, attention will shift to the University of Michigan Consumer Sentiment Index and its inflation expectations components — indicators that the Federal Reserve watches closely as it evaluates the trajectory of price pressures and household confidence. Overall, the Kiwi remains caught between domestic expectations for further easing and a US dollar supported by steadier economic signals. With policy decisions and key data releases approaching, volatility in NZD/USD may increase as traders seek clarity on the next phase for both economies.Key Movers
Markets finally received long-awaited clarity on the state of the US labor market as the first official employment figures in weeks were released, following delays caused by the recent government shutdown. The September Nonfarm Payrolls (NFP) report delivered a clear upside surprise, with job gains rising by 119,000, more than double the consensus forecast of 50,000. Although the headline figure signals renewed hiring momentum after weeks of uncertainty, revisions to earlier data painted a slightly softer backdrop. August payrolls were adjusted to show a modest 4,000 decline, reversing the previously reported 22,000 increase. The unemployment picture also offered a blend of strength and caution. The jobless rate edged up to 4.4%, just above the anticipated 4.3%. While this uptick may suggest a loosening in labor market tightness, it was accompanied by a small but notable improvement in the Labour Force Participation Rate, which rose to 62.4% from 62.3%. The increase indicates that more people are re-entering or seeking entry into the workforce — often a sign of growing confidence, even if it places upward pressure on the unemployment rate in the short term. Wage dynamics, meanwhile, showed softer-than-expected momentum. Average Hourly Earnings increased by 0.2% month-on-month, undershooting the 0.3% forecast and hinting that wage pressures may be easing. On an annual basis, wages grew by 3.8%, just slightly above expectations for 3.7%. Though still relatively firm, the pace of pay growth appears to be moderating compared with earlier periods of tighter labor-market conditions. This may offer some reassurance to policymakers concerned about wage-driven inflation, particularly as the Federal Reserve gauges how close the economy is to a sustainable balance between growth and price stability. Average Weekly Hours held steady at 34.2, signalling little change in underlying labour demand. Stable hours, combined with the stronger-than-expected payrolls figure, suggest that employers remain broadly confident but are not yet expanding work schedules in a way that would signal an acceleration in activity. Overall, the September report presents a nuanced but generally encouraging picture. The rebound in job creation is a welcome sign after several weeks of incomplete data, and the slight rise in participation points to a labour market still capable of attracting workers. However, the mixed signals, including the higher unemployment rate and softer wage growth, highlight an economy navigating a gradual cooling rather than a sharp slowdown. For markets and policymakers alike, the report provides fresh evidence that the labour market remains resilient, even as it continues to drift toward a more balanced footing.Expected Ranges
- NZD/USD: 0.5500 - 0.5700 ▼
- NZD/EUR: 0.4750 - 0.4950 ▼
- GBP/NZD: 2.3300 - 2.3500 ▲
- NZD/AUD: 1.1400 - 1.1600 ▼
- NZD/CAD: 0.7800 - 0.8000 ▲