New Zealand dollar continues to trade below US$0.61  

Daily Currency Update

The New Zealand dollar is slightly weaker this morning when valued against the Greenback currently trading at US$0.6077 at the time of writing. NZD/USD halts its three-day winning streak, trading around US$0.6080 during the Asian hours on Tuesday. This downside could be attributed to the stronger US dollar (USD), which gains support from fading expectations that the US Federal Reserve (Fed) will implement aggressive interest rate cuts following a strong jobs report and concerns about sticky US inflation. NZ fixed-income yields moved lower in the local session yesterday. 2-year swap rates fell 6bp to 3.71% with a largely parallel curve adjustment. There wasn’t an obvious catalyst for the move but the 20bp move higher in October likely attracted fresh receiving interest ahead of key NZ CPI data. The domestic focus will be on Q3 CPI data today with inflation likely to return within the BNZ’s target band for the first time since Q1 2021. Our forecast for the annual headline rate is 2.3%, which aligns with the RBNZ’s projection, from the August Monetary Policy Statement. We expect non-tradeable annual inflation to ease to 5.1%, from 5.4% in Q2, which would also match RBNZ expectations. There will also be a focus on the various core measures. The New Zealand dollar is under downward pressure as markets anticipate an 80% likelihood that the Reserve Bank of New Zealand will execute another half-point rate cut at its final meeting of the year in November.