Key data in focus for USD bulls amid Fed hike bets as New Zealand Dollar stays weak

The previous day’s recovery from the post-RBNZ swing low fails to gain momentum in NZD/USD.
Renewed USD buying, fuelled by hawkish Fed expectations and geopolitical risks, puts spot prices under pressure.
The Advance US Q3 GDP report and US PCE figures are the next potential catalysts for traders.

NZD/USD is trading near 0.5620. Renewed US Dollar (USD) demand leaves the pair looking vulnerable after sellers emerged on Thursday’s modest Asian-session rise towards 0.5635-0.5640. The selling has halted the previous day’s rebound from a two-week low reached following the Reserve Bank of New Zealand (RBNZ) policy update.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

An 80% probability of another December rate increase is now priced in by traders, according to the CME Group’s FedWatch Tool. Expectations of further Federal Reserve (Fed) tightening have been reinforced by concerns over energy-driven price pressures. Fed Chair Kevin Warsh told reporters that the central bank remains alert to persistent inflation and geopolitical risks. Together, these factors have helped the USD Index (DXY), a measure of the Greenback against a currency basket, resume gains after Wednesday’s post-FOMC correction from a two-week high. Fears of a further escalation in Middle East tensions are also supporting the safe-haven US currency.

US officials have advised several Gulf Arab countries to prepare for a short, intense military campaign against Iran after the November 3 midterm elections, The Wall Street Journal reported on Tuesday. Iranian Foreign Minister Abbas Araghchi said the armed forces were ready to defend the country, while Tehran would maintain close contact with intermediaries to give diplomacy a chance. Intense fighting in Yemen between the Iran-backed Houthis and the Saudi Arabia-backed government is also sustaining the geopolitical risk premium and lending support to the USD. On the other side of the pair, the RBNZ’s unexpected decision to leave interest rates unchanged is weighing on the New Zealand Dollar (NZD), limiting NZD/USD’s upside.

Before adding fresh positions, however, USD bulls appear inclined to wait for clearer signals on the Fed’s policy outlook. Attention therefore turns to the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index. These key US releases will be important drivers of USD price action. Nevertheless, the fundamental backdrop described above remains supportive of USD bulls. Combined with the divergence between the Fed and RBNZ, it suggests that NZD/USD’s path of least resistance is still lower.

Today’s US Dollar Performance

Against the major currencies listed below, the US Dollar (USD) recorded its strongest performance versus the New Zealand Dollar today. The table presents the percentage changes for each currency pairing.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.04%	0.00%	-0.11%	-0.06%	0.01%	0.05%	0.00%
EUR	-0.04%		-0.04%	-0.16%	-0.13%	-0.03%	0.00%	-0.04%
GBP	-0.01%	0.04%		-0.11%	-0.10%	0.00%	0.05%	-0.00%
JPY	0.11%	0.16%	0.11%		0.02%	0.12%	0.13%	0.10%
CAD	0.06%	0.13%	0.10%	-0.02%		0.10%	0.13%	0.10%
AUD	-0.01%	0.03%	-0.01%	-0.12%	-0.10%		0.05%	-0.01%
NZD	-0.05%	-0.00%	-0.05%	-0.13%	-0.13%	-0.05%		-0.01%
CHF	-0.01%	0.04%	0.00%	-0.10%	-0.10%	0.01%	0.00%

Percentage movements between major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. For instance, choosing the US Dollar on the left and following that row across to the Japanese Yen gives the percentage change for USD (base)/JPY (quote) in the corresponding cell.