The NZD/USD pair has drawn buyers for the third consecutive day, reaching a fresh year-to-date (YTD) peak around the 0.6375 mark during Monday’s Asian session.
This upward movement is supported by a series of stimulus measures announced last week, as the People’s Bank of China (PBOC) stated on Sunday that it would instruct banks to reduce mortgage rates for existing home loans before October 31. This decision has enhanced market sentiment, benefiting the risk-sensitive Kiwi dollar. Additionally, subdued price action in the US Dollar (USD), influenced by dovish expectations regarding the Federal Reserve (Fed), has further supported the NZD/USD pair.
Market expectations indicate a greater than 50% likelihood of another substantial interest rate cut by the US central bank in November, according to the CME Group’s FedWatch Tool. This has kept the USD Index (DXY)—which measures the dollar against a basket of currencies—near its lowest level since July 2023, which was recorded last week. However, escalating tensions in the Middle East and the potential for conflict may provide some support for the safe-haven dollar, limiting upside potential for the NZD/USD pair.
Furthermore, mixed Purchasing Managers’ Index (PMI) data from China released earlier today failed to impress market bulls. China’s official Manufacturing PMI improved to 49.8 in September from 49.1, surpassing expectations of 49.5. In contrast, the NBS Non-Manufacturing PMI unexpectedly fell to 50.0 from 50.3 in August. Additionally, the Caixin Manufacturing PMI contracted to 49.3 in September from 50.4 in the previous month, and the Caixin Services PMI dropped to 50.3 from 51.6 in August.
Despite this mixed economic data, the overall fundamental outlook suggests that the path of least resistance for spot prices remains upward, supporting the continuation of a three-week uptrend. Investors are now looking ahead to the release of the Chicago PMI later in the early North American session, although all eyes will remain on Fed Chair Jerome Powell’s upcoming speech. This, along with broader risk sentiment, will influence USD demand and present traders with short-term opportunities in the NZD/USD pair.
Related topics:
