NZD/USD Remains Steady as China’s PMI Surpasses Expectations; Key Market Data Awaited
For the third consecutive session, the NZD/USD pair remains stable, trading around 0.5980 during Asian hours on Friday. The New Zealand Dollar (NZD) is finding some support from positive economic data from China, its largest trading partner. The Caixin Manufacturing Purchasing Managers’ Index (PMI) in China rose unexpectedly to 50.3 in October, marking an improvement from 49.3 in September and surpassing the forecasted 49.7. A PMI above 50 suggests expansion in factory activity, which could bolster demand for New Zealand’s exports.
Adding to the upbeat sentiment, Statistics New Zealand reported a 2.6% month-on-month increase in building permits for September, bouncing back from a 5.3% decline in August. This growth signals recovery in New Zealand’s construction sector, which could further support the Kiwi Dollar.
However, the New Zealand Dollar faces headwinds as the Reserve Bank of New Zealand (RBNZ) adopts a more dovish stance. With inflation back within the RBNZ’s target range, markets have fully priced in a 50 basis point rate cut in November. The cash rate is anticipated to drop from 4.75% to 3.82% by the end of the year, which could limit NZD’s upside potential.
USD Regains Ground Amid Pre-Election Uncertainty and Strong Job Market Signals
The US Dollar (USD) has ended its four-day losing streak, buoyed by market caution as uncertainty looms ahead of the upcoming US presidential election. However, challenges for the USD persist as inflation indicators remain subdued. The US Personal Consumption Expenditures (PCE) Price Index, a preferred inflation gauge, showed a year-over-year core inflation increase of 2.7% in September, which may ease pressure on the Federal Reserve (Fed) to consider imminent rate cuts.
Despite this, a strong labor market may prompt the Fed to maintain its current rate stance. Initial Jobless Claims for the week ending October 25 fell to a five-month low of 216,000, reflecting resilience in the job market. Such strength has dampened expectations for rate cuts by the Fed.
Market participants are now closely watching the upcoming Nonfarm Payrolls (NFP) report, set to be released on Friday. The US economy is expected to have added 113,000 jobs in October, with the Unemployment Rate likely to hold steady at 4.1%.
