New Zealand Dollar rebounds ahead of US jobs data, election uncertainty lingers
The NZD/USD pair recovers some lost ground to near 0.5610, snapping the three-day losing streak during the early European session on Friday.
The New Zealand Dollar (NZD) showed a brief recovery, reaching close to 0.5610 against the US Dollar (USD) as markets opened in Europe on Friday. However, the upside potential may be constrained due to rising U.S. Treasury yields and a hawkish tone from the Federal Reserve. The 10-year U.S. Treasury yield climbed to 5.34%, the highest since 2002, while the 30-year bond yield approached levels not seen in 24 years before softening.
Dallas Fed President Lorie Logan expressed the need for at least a 50 basis point (bps) rate increase to tighten monetary policy and bring inflation closer to the Fed's 2% objective. The upcoming U.S. jobs report for September, expected to show a 90,000 increase in nonfarm payrolls, and a stable U.S. unemployment rate of 4.1% will be key factors in the coming days.
New Zealand's political landscape is also influencing the currency, with the impending election on November 7 potentially introducing policy uncertainty. If the Labour Party wins, it may restore a dual mandate, leading to further policy shifts. The Fed's stance, as indicated by President Logan's speech, suggests a more aggressive tightening path, which could benefit the U.S. dollar and put downward pressure on the New Zealand dollar.
Technical analysis shows that the NZD/USD pair has slipped below key support levels, with the lower Bollinger band at 0.5565 offering immediate resistance. Should the pair break this level, the bearish trend could continue.
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