- The NZD/USD pair reaches the 10-week low of 0.5987 on Friday.
- Michigan Consumer Sentiment Index is expected to come in at 69.0 in October, against its previous 68.9 reading.
- ANZ-Roy Morgan Consumer Confidence index fell to 91.2 in October, breaking a three-month upward trend.
The NZD/USD pair has given up recent gains from the previous session, trading around 0.6000 during early European hours on Friday. The pair reaches a 10-week low of 0.5987 earlier in the Asian session.
On Thursday, data indicated that US unemployment claims dropped significantly in late October, underscoring the strength of the labor market. Additionally, a rise in the S&P PMI further highlights robust momentum in the private sector.
The recent positive US data supported the growing expectations that the Federal Reserve (Fed) will adopt a less aggressive approach to rate cuts than previously anticipated. Traders will be watching US Durable Goods Orders and the Michigan Consumer Sentiment Index data, due later in the North American session.
Additionally, the USD is also strengthened by uncertainties surrounding the upcoming US presidential election. According to a recent Reuters/Ipsos poll, Vice President Kamala Harris holds a narrow lead of 46% to 43% over former President Donald Trump in a six-day poll that concluded on Monday.
Republican nominee Donald Trump expressed his intent on Thursday to build an economy that supports all American communities. Meanwhile, Vice President Kamala Harris received support from rock legend Bruce Springsteen, entertainer Tyler Perry, and former President Barack Obama at a rally in Georgia.
In New Zealand, the ANZ-Roy Morgan Consumer Confidence index declined to 91.2 in October from 95.1 in September, breaking a three-month upward trend.
Traders remain cautious as labor market challenges continue to weigh on market sentiment despite anticipated interest rate cuts from the Reserve Bank of New Zealand (RBNZ). However, rising house prices are helping to bolster overall confidence, inflation has begun to stabilize within the RBNZ's target range.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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