Insights 
VT 
The NZD/USD pair is extending its recovery from the 0.5685-0.5680 range, reaching a near three-week high during the Asian session on Tuesday. Spot prices are trading around 0.5780, up over 0.20% for the day, supported by a positive economic outlook.
Easing trade tensions between the US and China are bolstering antipodean currencies, including the Kiwi. Recent agreements on a potential trade deal have contributed to a positive risk sentiment, weighing on the US Dollar, which is also pressured by expectations of Federal Reserve rate cuts.
Federal Reserve Actions
The CME Group’s FedWatch Tool indicates traders are almost completely pricing in a 25-basis-point interest rate cut on Wednesday, with another cut anticipated in December. Recent US consumer inflation figures have reinforced this sentiment, keeping the US Dollar subdued.
The Reserve Bank of New Zealand’s dovish outlook, aiming to maintain inflation near the 2% target, might constrain NZD/USD gains. Despite this, conditions continue to favour an upward trend as the pair eyes the 0.5800 mark.
Major currencies exhibited percentage changes against the US Dollar, with USD down 0.36% against the NZD. The heat map displays these changes, reflecting the currency dynamics of the week.
We are seeing the NZD/USD push towards the 0.5900 level, continuing a solid recovery from its lows near 0.5750 earlier this month. This move is being driven by a softer US Dollar and a general improvement in market risk appetite. This fundamental backdrop suggests there may be more room for the pair to climb in the coming weeks.
Economic Context and Projections
This situation feels similar to past periods, such as the late 2010s, where any sign of easing US-China trade friction boosted the Kiwi dollar. While direct trade wars are not the headline issue today in October 2025, renewed high-level dialogues between the two nations are similarly calming market fears. This positive risk tone makes commodity-linked currencies like the NZD more attractive than the safe-haven USD.
The US Dollar is also softening as markets increasingly anticipate a policy pivot from the Federal Reserve. After a long period of restrictive rates, recent US inflation data from September 2025 came in at 2.8%, reinforcing the view that the Fed’s next move will be a cut. The CME FedWatch Tool is now pricing in a greater than 60% probability of a rate cut by the end of the first quarter of 2026.
However, we must consider that the Reserve Bank of New Zealand has also signaled a dovish outlook, which could cap the rally. New Zealand’s recent Q3 2025 GDP figures showed growth slowing to just 0.2%, giving the RBNZ reason to consider easing its own policy to support the domestic economy. This means that while the Fed may be dovish, the RBNZ is not far behind.
For derivative traders, this suggests a strategy of cautious optimism, as the path of least resistance appears to be upward for now. Buying call options on NZD/USD could allow participation in a potential move towards 0.6000 while defining risk. This is particularly relevant given the uncertainty surrounding the timing of rate cuts from both central banks.
