The NZD/USD pair has started the new week quietly, trading within a narrow range of 0.5670-0.5675 during the Asian session. Despite this, the pair remains near a one-and-a-half-week high of approximately 0.5700, reached last Friday amidst conflicting market signals.
Last Friday, US President Donald Trump lifted tariffs on approximately $1.25 billion worth of New Zealand exports to the US. This move is considered a significant positive factor for the NZD/USD pair. However, ongoing concerns about China’s economy and increased expectations for another interest rate cut by the Reserve Bank of New Zealand (RBNZ) at its November 26th meeting are preventing traders from making substantial bullish bets on the New Zealand Dollar (NZD).
Conversely, the US Dollar (USD) is attracting some safe-haven flows due to a generally softer tone in global equity markets, which in turn is limiting upward movement for the risk-sensitive NZD/USD pair. Nevertheless, any significant USD appreciation appears unlikely given concerns about weakening economic momentum in the wake of the longest-ever US government shutdown. This, coupled with dovish expectations for the Federal Reserve (Fed), could cap further gains for the Greenback.
According to the CME Group’s FedWatch Tool, traders continue to price in roughly a 50% chance that the US central bank will reduce borrowing costs next month. Additionally, hopes for further stimulus measures from China are providing some support to antipodean currencies, including the Kiwi. Consequently, caution is advised before concluding that the NZD/USD pair’s rebound from around the 0.5600 level, a multi-month low, has ended, or before anticipating further declines.
