The New Zealand Dollar (NZD/USD) has paused its three-day winning streak, trading around 0.6080 during the Asian session on Tuesday. This decline can be attributed to the strengthening US Dollar (USD), buoyed by diminishing expectations for aggressive interest rate cuts from the US Federal Reserve (Fed) in light of a robust jobs report and persistent inflation concerns.
The US Dollar Index (DXY), which gauges the USD’s value against six major currencies, has extended its winning streak to six consecutive days, currently trading at approximately 103.30. Meanwhile, the yields on 2-year and 10-year US Treasury bonds stand at 3.96% and 4.09%, respectively.
Market Highlights:
On Monday, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, reiterated the Fed’s data-dependent approach, emphasizing the strength of the US economy. He noted that inflationary pressures continue to ease while the labor market remains robust, despite a slight uptick in the overall unemployment rate.
The NZD weakened following disappointing trade balance data from China, New Zealand’s largest trading partner. Investors remained cautious despite the announcement of China’s fiscal stimulus plan over the weekend, uncertain about the scale of the measures.
China reported a narrowing trade surplus in September, with the Trade Balance recorded at $81.7 billion, falling short of the expected $89.8 billion and down from the previous $91.02 billion. Exports rose by 2.4% year-over-year, significantly below the anticipated 6.0% and down from 8.7% in the prior period. Imports increased by 0.3%, also missing expectations of 0.9% and lower than the previous 0.5% growth.
Investors are closely monitoring the release of New Zealand’s third-quarter inflation data, scheduled for Wednesday. The Consumer Price Index (CPI) is anticipated to fall back within the Reserve Bank of New Zealand’s (RBNZ) target range of 1-3%, decreasing to 2.2% year-over-year for the September quarter from the previous reading of 3.3%.
The NZD is facing additional downward pressure as market participants anticipate an 80% likelihood that the RBNZ will implement another half-point rate cut during its final meeting of the year in November.
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