The New Zealand Dollar (NZD) declined against the US Dollar (USD) on Friday, with NZD/USD trading around 0.5710, down 0.34% on the day [1]. The primary driver of this move was renewed US Dollar strength, following hawkish remarks from Federal Reserve Chair Kevin Warsh. Warsh emphasized that inflation remains uncomfortably high and noted that recent economic data has not shown convincing structural improvement, reinforcing expectations for tighter US monetary policy [1].
Market participants responded to Warsh's comments by increasing the probability of a US interest rate hike at the Federal Reserve's October meeting. According to the CME FedWatch tool, the likelihood of a rate hike rose to 53.1%, up from 44% the previous day, supporting the Greenback and pressuring NZD/USD lower [1].
On the New Zealand side, monetary policy expectations are somewhat supportive for the NZD, with markets assigning a 60% chance that the Reserve Bank of New Zealand (RBNZ) will raise its policy rate to 3% at its October meeting [1]. However, the latest trade data from New Zealand presented a mixed picture: the trade balance deficit narrowed to NZ$1.35 billion in August from NZ$2.12 billion in July, but this was still wider than the NZ$1.275 billion deficit expected by market consensus [1]. Exports rose 15.4% year-on-year to NZ$6.66 billion, while imports increased 13.1% to NZ$8 billion [1].
Technical analysis shows NZD/USD retains a bearish near-term bias, trading below key moving averages and resistance levels, with the Relative Strength Index (RSI) at 37 indicating weak downside momentum [1]. Immediate support is seen at 0.5703, with a deeper floor at 0.5670, suggesting that a sustained move below these levels could extend the current bearish phase [1].
CONCLUSION
The NZD/USD pair is under pressure due to a stronger US Dollar, driven by hawkish Fed commentary and rising expectations for a US rate hike. While New Zealand's trade data and RBNZ policy outlook offer some support, the dominant market sentiment currently favors the Greenback, keeping the NZD/USD outlook bearish in the near term.