The NZD/USD pair is trading with a mild negative bias near 0.6020 during the early Asian session on Friday, as concerns over Donald Trump’s tariff proposals and rate cut expectations from the Reserve Bank of New Zealand (RBNZ) weigh on the Kiwi Dollar.
US Dollar Dynamics
The US Dollar has remained resilient after the Federal Reserve’s (Fed) recent quarter-point rate cut, lowering the target range to 4.50%-4.75%. The Fed’s dovish stance suggests that another rate cut may be on the horizon, but the exact timing remains uncertain. Market participants are now pricing in a nearly 75% probability that the Fed will implement another rate cut in December, up from 69% earlier in the week, according to the CME Group’s FedWatch Tool.
Despite the dovish expectations for the Fed, the US Dollar has found some support from rising Treasury yields and the potential for more interest rate cuts. This is capping the NZD/USD’s upside for now, as traders continue to monitor the economic data and the Fed’s actions.
Impact of Trump’s Trade Policies
A key concern for the NZD is Donald Trump’s potential trade policy shift, which could see the US impose a 60% tariff on all Chinese goods. As China is one of New Zealand’s largest trading partners, these proposed tariffs could significantly impact NZD, which is often seen as a proxy for China’s economic performance. The speculation that Trump’s trade war could escalate adds to the downside pressure on the Kiwi, as it undermines the outlook for New Zealand’s trade-driven economy.
Speculation Around RBNZ Rate Cuts
Further contributing to the NZD’s weakness is the growing expectation of a more aggressive rate-cut cycle from the Reserve Bank of New Zealand (RBNZ). The RBNZ is widely expected to lower the Official Cash Rate (OCR) by 50 basis points (bps) at its November meeting, with some speculating that a larger 75 bps cut could be on the table. This would add to the ongoing downtrend in the Kiwi, as the central bank continues to navigate challenges related to economic growth, inflation, and the global economic environment.
Key Events to Watch
As the US Michigan Consumer Sentiment report is scheduled for release later on Friday, traders will be keenly watching this data for further signs of economic strength or weakness in the US. In addition, Federal Reserve Governor Michelle Bowman is set to speak, and her comments on the Fed’s future monetary policy could provide more clarity on the central bank’s intentions and its impact on the US Dollar.
Technical Outlook
From a technical standpoint, NZD/USD continues to face resistance near 0.6050, with the downside potentially targeting the 0.6000 psychological level. If the pair breaks below this level, it could open the door to further downside toward the 0.5950 region. Conversely, a rally above 0.6050 could see the Kiwi testing the 0.6100 area, but this seems less likely in the near term given the broader headwinds.
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