The NZD/USD pair remains stable for the third consecutive session, trading around 0.5980 during the Asian hours on Friday. The New Zealand Dollar (NZD) is receiving some support from an unexpected uptick in factory activity in China, New Zealand’s largest trading partner.
China’s Caixin Manufacturing Purchasing Managers Index (PMI) rose to 50.3 in October, up from 49.3 in September, surpassing market expectations of 49.7. This positive data reflects a modest recovery in the manufacturing sector, which could bolster demand for New Zealand exports.
Additionally, Statistics New Zealand reported a 2.6% month-on-month increase in Building Permits for September, rebounding from a 5.3% decline in August. This increase in construction permits signals a potential uptick in future economic activity, further supporting the NZD.
Despite these positive signals, the Kiwi Dollar may face challenges due to rising expectations for a more dovish stance from the Reserve Bank of New Zealand (RBNZ). Inflation has returned to the RBNZ’s target range, leading markets to fully price in a 50 basis point rate cut in November. Current projections suggest a decrease in the cash rate from 4.75% to 3.82% by the end of this year, which could weigh on the NZD in the longer term.
On the US side, the US Dollar (USD) is breaking a four-day losing streak as market participants remain cautious ahead of the upcoming US presidential election. However, the Greenback has encountered headwinds from the recent Personal Consumption Expenditures (PCE) Price Index data, which showed core inflation rising by 2.7% year-over-year in September.
Moreover, Initial Jobless Claims fell to a five-month low of 216,000 for the week ending October 25, indicating a resilient labor market. This could temper expectations for imminent rate cuts by the Federal Reserve (Fed).
Traders are also anticipating the Nonfarm Payrolls (NFP) report set for release today, with expectations that the US economy added 113,000 jobs in October and that the Unemployment Rate will remain steady at 4.1%. The outcome of this report could provide significant direction for both the USD and NZD in the near term.
As both currencies navigate these economic signals, the NZD/USD pair remains in a delicate balance, with potential volatility expected following the NFP release.
Related Topics:
