- NZD/USD declines after Trump wins the US presidential election, boosting USD.
- The Kiwi Dollar is further hampered by weak NZ labor market data showing a rise in joblessness.
- NZD/USD could fall further if the policy trajectories of the two central banks diverge.
NZD/USD trades down by over three quarters of a percent in the 0.5940s as the US Dollar (USD) strengthens across the board following the announcement that the Republican nominee Donald Trump won the US presidential election.
In addition, the Republican party gained majorities in both the US Senate and US Congress. This will make it easier for Trump to implement his Dollar-positive economic agenda, including higher tariffs on foreign imports and overall lower taxes.
The reason Trump’s policies are bullish for the Dollar is because they will likely lead to increased spending, higher prices and rising inflation. This, in turn, will probably delay the Federal Reserve (Fed) from cutting interest rates. Higher interest rates attract greater foreign capital inflows so are positive for the Greenback.
New Zealand (NZ) employment data came out as the votes were being counted in the US and these showed the Unemployment Rate rising to 4.8% in Q3 from 4.6% in Q2. That said the result was lower than the 5.0% expected.
NZ Employment Change data declined by 0.5% in Q3, which was lower than the 0.4% decline forecast. The Labor Cost Index, a measure of wages, also fell below expectations, registering a 0.6% rise versus the 0.7% expected. ¡
The data will probably not change the outlook for the Reserve Bank of New Zealand’s (RBNZ) monetary policy – a major driver of NZD. Michael Gordon, Senior Economist at Westpac NZ, put the generally weak labor market and rise in joblessness down to, “more young people exiting the labor force, with study providing an outlet.”
NZ inflation declined to 2.2% in the September quarter, bringing it back inside the RBNZ’s target range of 1-3%. This prompted the central bank to lower its official cash rate (OCR) by a “double-dose” 50 basis points (bps) (0.50%) to 4.75% at its October meeting. This was the second consecutive rate cut from the bank and was as expected.
Given the weakness of the NZ economy – Gross Domestic Product (GDP) fell by 0.2% in Q2 – and an overall long-term decline in demand from its largest trading partner China, the RBNZ is expected to implement further interest rate cuts to stimulate growth. This is likely to have a negative impact on NZD/USD going forward, particularly as the pace of Fed cuts slows down from Trump’s inflationary policies.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.