The NZD/USD Pair Faces Pressure Despite Recovery in USD
- NZD/USD reaches two-week high of 0.6270
- US Dollar rebounds on lower-than-expected jobless claims data
- NZ economy shows slower contraction than anticipated in Q2
In Thursday’s North American session, the NZD/USD pair is up by over 0.5% but struggles to surpass the two-week high of 0.6270. This is due to the recovery of the US Dollar (USD) following the release of the lower-than-expected United States (US) Initial Jobless Claims data for the week ending in September.
US Jobless Claims Data Impact
The jobless claims data showed that 219K individuals claimed benefits for the first time, lower than the estimated 230K and the previous figure of 231K (revised from 230K). While this data has led to a USD rebound, its impact is expected to be short-lived as market speculation on the Federal Reserve’s interest rate cut path will play a crucial role in the near future.
Fed’s Dovish Decision
Recently, the Fed made its first dovish decision in over four years, cutting interest rates by 50 basis points to 4.75%-5.00%. Policymakers anticipate the federal fund rates to reach 4.4% by the year-end, while traders expect a total cut of 125 bps to 4.00%-4.25% this year. This has created a positive market sentiment, with investors expecting an aggressive policy-easing cycle from the Fed.
Market Outlook
Market sentiment is currently optimistic, as seen in the strong opening of the S&P 500, indicating a higher risk appetite among investors. The US Dollar Index (DXY) has also bounced back above 101.00, reversing its intraday losses.
Domestic Factors
In the Asia-Pacific region, the New Zealand Dollar (NZD) has strengthened on the back of better-than-expected Q2 Gross Domestic Product (GDP) data. The NZ economy contracted by 0.2%, slower than the anticipated 0.4% decline. Investors are now focusing on the upcoming People’s Bank of China (PBoC) interest rate decision, which could further impact the NZD due to the close trade ties between the two economies.
New Zealand Dollar FAQs
Here are some frequently asked questions about the New Zealand Dollar (NZD) and its market dynamics:
1. Factors Affecting NZD Value
- The health of the New Zealand economy
- Central bank policy
- Chinese economy performance
- Dairy prices
2. Role of Reserve Bank of New Zealand (RBNZ)
- Maintaining inflation rate between 1% and 3%
- Setting interest rates to control inflation
- Rate differentials compared to US Federal Reserve
3. Impact of Macroeconomic Data
- High economic growth strengthens NZD
- Low unemployment and high confidence are positive indicators
4. NZD Behavior During Market Conditions
- Strengthens during risk-on periods
- Weakens in market turbulence or economic uncertainty