The New Zealand dollar has tumbled to its weakest level against the US dollar in over a decade, extending a sharp decline that has erased more than 9% from its 2025 peak. The currency's slide accelerated after Friday's robust US employment report, which reinforced expectations that the Federal Reserve will resume its tightening cycle.
US Jobs Data Bolsters Rate Hike Bets
The US economy added 165,000 jobs last month, while the unemployment rate fell to 4.1%, both exceeding analyst forecasts. The strong labor market has led traders to price in a high probability of a rate hike at the Fed's December meeting. According to the CME FedWatch tool, the market now assigns a 76.3% chance of a hike, while prediction platforms Polymarket and Kalshi show odds above 95%.
Investors are now awaiting Tuesday's US consumer inflation report, which could solidify or temper these expectations. Economists anticipate a slight cooling in monthly inflation, but the annual rate is expected to remain above the Fed's 2% target. A hotter-than-expected reading would likely increase the odds of a December move. At its last meeting, the Fed held rates steady, with two officials—Beth Hammack and Lisa Cook—voting for an increase.
New Zealand's Election Adds Uncertainty
The kiwi's weakness also reflects the unresolved outcome of New Zealand's general election, which has been too close to call. The final result will not be known until November 27, when about 400,000 special votes are counted. The political uncertainty comes at a time when the economy is facing stubborn inflation and sluggish wage growth.
Recent data showed annual inflation slowed to 3.7% in the September quarter from 4.1% previously, but core inflation remains above the central bank's 1-3% target band. While export sectors benefit from high commodity prices, domestic consumption remains weak. The Reserve Bank of New Zealand kept its official cash rate at 2.75% but signaled it could raise rates if inflation persists.
Technical Outlook: Further Downside Likely
From a technical perspective, the NZD/USD pair has broken below key support at 0.5566, its October 14 low. The pair is trading below all major moving averages, and the Relative Strength Index (RSI) continues to trend lower, indicating sustained bearish momentum.
Analysts see the next downside target at 0.5484, the April 2025 low. A move back above 0.5566 would negate the current bearish setup, but with the fundamental backdrop favoring the US dollar, the path of least resistance appears to be lower.
This article is for informational purposes only and does not constitute financial advice.
