New Zealand Dollar Hits 13-month Low

The New Zealand dollar fell to around $0.583 on Tuesday, reversing gains from the previous session, pressured by a subdued outlook weighed by the Reserve Bank of New Zealand's anticipated continuation of its aggressive policy-easing approach.

The central bank recently cut rates by another 50 bps, bringing the cash rate to 4.25%, marking a total reduction of 125 bps this year, and signaled further substantial cuts early next year.

This aligns with recent remarks by New Zealand's Prime Minister, who emphasized a commitment to lowering inflation and interest rates to stimulate the economy.

Meanwhile, the Kiwi dollar found some support late Monday after China pledged “more proactive” fiscal policies and “moderately” looser monetary measures for 2025 to boost domestic consumption, as China is New Zealand’s largest trading partner.

Markets are now looking forward to the upcoming US inflation data, which could offer insights into the Federal Reserve’s monetary policy direction.

The New Zealand dollar rose to around $0.586 on Monday, recovering from an earlier loss and bouncing back from a more than 1% drop in the previous session.

The Kiwi dollar gained support after China pledged “more proactive” fiscal policies and “moderately” looser monetary measures for 2025 to boost domestic consumption, as China is the largest trading partner of New Zealand.

Domestically, the Kiwi remained under pressure due to a bearish outlook.

New Zealand Prime Minister Luxon reiterates his commitment to reducing inflation and interest rates to support the economy.

This aligns with the Reserve Bank of New Zealand's recent decision to cut rates by 50 basis points to 4.25% last month and signals further substantial rate cuts early next year.

Meanwhile, markets are looking forward to the upcoming US inflation data, which could offer insights into the Federal Reserve’s monetary policy direction.

The New Zealand dollar continued its decline, trading around $0.583 on Monday after an almost 1% loss in the previous session, weighed down by a bearish outlook.

Early in the day, New Zealand Prime Minister Luxon reiterated his commitment to reducing inflation and interest rates to support the economy.

This aligns with the Reserve Bank of New Zealand's recent monetary policy decision to cut rates by another 50 basis points to 4.25% last month and signaled substantial rate reductions early next year.

The Kiwi also faced pressure from concerns over China's economy, as data highlighted persistent deflationary pressures in New Zealand's largest trading partner.

Meanwhile, markets are now turning their attention to US inflation data due later this week, which could provide insights into the Federal Reserve's monetary policy trajectory.

The New Zealand dollar eased to around $0.586 on Friday, heading for a weekly decline.

Markets participants braced for the highly anticipated U.S. jobs report, due later in the day, which could provide more clarity on the Federal Reserve's next move on interest rates.

At home, the outlook for the Kiwi dollar remains bearish amid expectations of further substantial interest rate cuts by the Reserve Bank of New Zealand.

The RBNZ has already reduced its official cash rate by 125bps this year to 4.25% and is expected to deliver another 50bps cut at its policy meeting in February next year.

So far this week, the New Zealand dollar has fallen 0.8%, erasing some of the previous week's 1.5% gain.

The New Zealand dollar rose to around $0.586 on Thursday, snapping a three-day losing streak, supported by the modest decline in the US Dollar.

However, the greenback’s weakness may be limited, with Federal Reserve Chair Jerome Powell highlighting that the US economy is in “remarkably good shape" and that the central bank is now on a path to bring interest rates to a neutral level over time.

Domestically, the Kiwi also remains under pressure due to the Reserve Bank of New Zealand's dovish stance.

The RBNZ has cut its benchmark interest rate by 125bps this year to 4.25% and signalled further monetary easing early next year, potentially by another 50bps, if economic conditions continue to evolve as projected.

Markets:

• Gold up $3.96 or 0.15% at $70.09
• US 2-year yield 4.167%, -0.4 basis points
• US 10-year yield 4.226%, +0.5 basis points
• WTI crude oil up $0.19 or 0.27% at $70.09
• Nikkei 225 +26 points or 0.07% at 39276
• Shanghai composite -0.07%
• Hong Kongs Hang Seng +0.08%
• China CSI300 -0.21%
• So.Korea Kospi -1.92%

The US dollar is trading higher /mixed with dollars gain vs the AUD and NZD leading the way. The DXY dollar index is up 0.01%

• EUR, unchanged
• JPY +0.27%
• GBP, -0.04%
• CHF unchanged
• AUD +0.71%
• NZD +0.46%

The Australia GDP came in weaker than expectations at 0.3% vs 0.4% with household spending (which accounts for 1/2 of GDP, added 0 to growth in the quarter, leaving government spending to do all of the heavy lifting with a contribution of 0.6% to GDP.

That started selling in the AUDUSD and its shadow, the NZDUSD. China Caixin Services PMI also came in weaker than expected which also helped to contribute some to the declines.

Technically the AUDUSD fell from a closing level near 0.6481 to a low of 0.6407. The move took the price below swing lows from the month of November between 0.6433 and 0.64419. The high of that level was tested on Monday before bouncing higher into resistance near the 100 bar MA on the 4-hour chart.

The price of the AUDUSD has rebounded higher into the November lows, trading between the high and low of the area at 0.6433 to 0.64419 as I type. Will the sellers show up here and rotate back to the downside? It is the key test after the break lower.

The NZDUSD was the 2nd largest mover in the session with it moving from resistance near the 100-hour MA (near 0.5882) down to a low of 0.5830. Technically,the move in addition to staying under the 100-hour MA, broke below a swing area between 0.5859 and 0.58667. That area will be close risk for sellers into the European session.

The EURUSD tried to move lower after closing near its 200-hour MA at 1.0507. The low reached down to 1.0487 before buncing back to the unchanged level on the day and also the 200-hour MA. What will be key on more upside is if the 100-hour MA can hold the rally once again. The last three tests of the MA line yesterday and on Monday, the sellers leaned and put a lid on the pair. The 100-hour MA comes in at 1.05299 currently and moving lower.

In the session, ECB's Holzmann stated that a 25 basis point rate cut is possible in December, but nothing more than that is likely. He emphasized that no decisions on the next rate move have been made, as they will depend on the data available at the December meeting. Holzmann also remarked that U.S. President elect Trump is influencing inflation forecasts in Europe, likely contributing to increased inflation expectations.

The private crude oil inventory data was released showing a surprise build of 1.232M vs an expected drawdown of -0.671M. The EIA weekly data will be released tomorrow at 10:30 AM ET.

The European and the US session will have a slew of data released:

• 3:15am - EUR - Spanish Services PMI, Est 53.4

• 3:45am - EUR - Italian Services PMI, Est 50.9

• 3:50am - EUR - French Final Services PMI, Est 45.7

• 3:55am - EUR - German Final Services PMI, Est 49.4

• 4:00am - EUR - Final Services PMI Est 49.2

• 4:30am - GBP - BOE Gov Bailey Speaks

• 5:00am - EUR - PPI m/m, Est 0.4%

• 8:15am - USD - ADP Non-Farm Employment Change, Est 152K

• 8:30am - CAD - Labor Productivity q/q, -0.2%

• 8:45am - EUR - ECB President Lagarde Speaks

• 8:45am - FOMC voting member Musalen speaks

• 9:45am - USD - Final S&P Global Services PMI, Est 57.0

• 10:00am - USD - ISM Services PMI, Est 55.7

• 10:00am - Factory Orders MoM, Est 0.2%

• 10:30am - USD - Crude Oil Inventories

• 1:45 PM - Fed Chair Powell speaks

• 2:00 PM - Fed's Beige Book

Good fortune with your trading.