The NZD/USD exchange rate gained traction as the US Dollar (USD) experienced downward pressure following the release of the Federal Reserve’s (Fed) Beige Book on Wednesday. The report revealed that economic activity was “little changed in nearly all Districts,” a stark contrast to August’s findings, which showed growth in three Districts and flat activity in nine. During the Asian session on Thursday, the pair was trading around 0.6010.
The slight weakening of the US Dollar was attributed to a modest decline in US Treasury yields, with the 2-year and 10-year yields currently at 4.07% and 4.23%, respectively. Despite this, the US Dollar Index (DXY)—which measures the dollar’s value against six major currencies—climbed to its highest level since late July, peaking at 104.57 on Wednesday.
Economic resilience and rising inflation concerns have diminished the likelihood of a substantial rate cut by the Federal Reserve in November. The CME FedWatch Tool indicates an 88.9% probability of a 25-basis-point cut, with no expectations for a more significant 50-basis-point reduction.
Traders are also closely monitoring the S&P Global Purchasing Managers Index (PMI), a key indicator of US private-business activity in the manufacturing and services sectors, scheduled for release on Thursday.
However, the potential for further gains in the New Zealand Dollar (NZD) may be limited due to increasing expectations of another rate cut by the Reserve Bank of New Zealand (RBNZ) in November, as inflation continues to ease and economic output remains sluggish.
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