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VT 
New Zealand Dollar Faces Ongoing Challenges
The New Zealand Dollar weakens against the stronger US Dollar despite a rise in business sentiment from the latest ANZ survey. The NZD/USD pair was trading at approximately 0.5740, a decrease of 0.37%, after nearing a resistance level at 0.5800 the previous day.
The October ANZ Business Outlook survey showed an improvement in sentiment, with Business Confidence rising to 58.1 and the Activity Outlook reaching 44.6. However, the Reserve Bank of New Zealand is still expected to implement a 25-basis-point rate cut in November, currently having a 90% probability as markets estimate.
The New Zealand Dollar faces continued pressure from a robust US Dollar, influenced by improved market sentiment following a US-China trade truce. All eyes are on the upcoming release of the New Zealand ANZ Roy Morgan Consumer Confidence Index for October, potentially impacting monetary policy forecasts.
A table indicates the New Zealand Dollar’s performance against major currencies, marking its strongest showing against the Japanese Yen. FXStreet provides market analysis, warning of the high risks associated with market investments. Information shared does not constitute investment advice.
Interest Rate Dynamics and Market Sentiment
We are seeing clear signals that the Reserve Bank of New Zealand is preparing to cut rates at its November 26 meeting. Current market pricing implies an almost 90% probability of a 25 basis point cut, which would be the first easing move since early 2024. This follows recent data showing New Zealand’s quarterly inflation has finally dipped to 2.9%, just inside the RBNZ’s target band.
At the same time, the US Dollar remains firm because the Federal Reserve is holding its ground. The Fed has shown no immediate intention of lowering its own rates from the current 5.25% level, creating a widening policy difference with New Zealand. This interest rate differential continues to make holding US Dollars more attractive than the Kiwi.
For traders, this points toward positioning for further weakness in the NZD/USD pair leading into late November. We believe purchasing put options with a December expiry is a prudent strategy to capitalize on a potential drop following the RBNZ decision. This approach offers a defined risk while targeting levels below the recent support around 0.5700.
While we’ve seen positive domestic business surveys, these are being overshadowed and should be viewed as opportunities to initiate bearish positions on any temporary strength. Looking back, we saw a similar pattern in 2019 where sentiment improved but rate cuts still drove the currency lower. Recent Commitment of Traders data supports this, showing non-commercial futures traders have increased their net short positions on the Kiwi by over 12% in October.
