Kiwi dollar pushes higher as markets price in Fed easing
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Daily Currency Update
The New Zealand dollar (NZD) has continued to build on its recent strength, maintaining a solid bullish tone against the US dollar (USD) as the week comes to a close. After holding firm above the 0.5760 level, the NZD/USD pair has shown impressive resilience, with buyers repeatedly stepping in to support the currency each time it has dipped. This steady support has allowed the pair to resume the upward trend that began in mid-November, ultimately pushing it toward monthly highs near 0.5780. With this momentum in place, traders are now looking toward the next significant area of interest around 0.5800, where the highs from October 6 and October 29 previously capped price advances. The pair’s recent performance is particularly notable when viewed over a slightly longer timeframe. Over the past two weeks, the NZD/USD pair is on track to close with an impressive rally of nearly 3%. This marks one of its strongest multi-week advances in recent months and reflects a combination of supportive domestic conditions and shifting expectations in the global economic landscape. While the New Zealand economy itself has not been the primary driver of this surge, the currency is benefiting from a broader trend of US dollar weakness. That weakness in the USD is largely tied to growing anticipation surrounding the upcoming US Federal Reserve meeting. Traders are increasingly confident that the Fed will cut interest rates by 25 basis points next week—a move that would represent a meaningful shift after the long period of elevated rates aimed at controlling inflation. Even more importantly, markets are now pricing in the possibility of two or even three additional rate cuts next year. Such expectations tend to weigh heavily on the US dollar, as lower interest rates reduce the currency’s yield advantage and encourage investors to explore alternatives with potentially higher returns. For the New Zealand dollar, this environment has created an opportunity to extend its gains. As long as the Federal Reserve maintains a dovish tone and global risk sentiment remains relatively stable, the NZD may continue to find buyers willing to support further appreciation. Technical indicators also point toward a constructive outlook, with higher lows and sustained demand helping to reinforce the bullish trend. Looking ahead, the key level to watch remains the 0.5800 region. A decisive break above this area could open the door for a more extended upward move, potentially attracting fresh momentum traders into the market. With monetary policy expectations in flux and sentiment tilting in favour of higher-yielding currencies, the New Zealand dollar appears well-positioned to retain its upward trajectory in the near term.Key Movers
American consumer confidence showed a modest but encouraging improvement in early December, according to preliminary figures released on Friday by the University of Michigan (UoM). The uptick suggests that households are feeling slightly more positive about both their current financial situations and the broader direction of the US economy as the year draws to a close. The headline Consumer Sentiment Index, one of the most closely watched measures of how Americans perceive economic conditions, rose to 53.3 in December. This marks an increase from November’s reading of 51 and comes in above the consensus forecast of 52. While sentiment remains well below historical averages, the improvement indicates that consumers may be gradually regaining confidence after months of concern over inflation, interest rates, and economic uncertainty. A closer look at the report reveals a mixed but generally optimistic set of underlying details. The UoM’s Current Conditions Index, which reflects how households feel about their personal finances and the present state of the economy, dipped slightly to 50.7 from 51.1. Although this represents a small decline, the measure remains relatively stable, suggesting that consumers’ day-to-day assessment of economic conditions has not significantly worsened. More encouraging is the movement in the Consumer Expectations Index, which tracks how households view economic prospects over the next six months. This measure climbed to 55 in December, up sharply from November’s reading of 51. The improvement points toward growing optimism among consumers about the economic outlook for early 2025. Expectations are a key component of the sentiment survey, as they influence household spending decisions, which in turn play a major role in shaping the broader economy. Another notable development in the December report involves inflation expectations—a critical element for policymakers at the Federal Reserve. The survey showed that short-term inflation expectations fell meaningfully. The one-year outlook eased to 4.1%, down from 4.5% in November. Longer-term expectations also moderated, with the five-year forecast slipping to 3.2% from 3.4%. Although these figures are still above the Fed’s 2% inflation target, the downward trend may provide some reassurance that consumers believe price pressures will continue to gradually cool. Overall, the preliminary December data paints a cautiously optimistic picture. While Americans remain mindful of economic challenges, the improvement in sentiment, particularly expectations for the months ahead, suggests that consumers are beginning to feel slightly more at ease. If inflation continues to ease and the job market remains resilient, this budding confidence could help support stronger economic activity in the early part of next year.Expected Ranges
- NZD/USD: 0.5650 - 0.5850 ▲
- NZD/EUR: 0.4800 - 0.5000 ▲
- GBP/NZD: 2.3200 - 2.3400 ▼
- NZD/AUD: 1.1350 - 1.1550 ▼
- NZD/CAD: 0.7800 - 0.8000 ▲