The NZD/USD pair came under fresh selling pressure during early European trading on Friday, drifting lower toward the 0.5760 region amid renewed demand for the US Dollar (USD). Market participants are now awaiting the release of the University of Michigan Consumer Sentiment Index and UoM Consumer Inflation Expectations later in the day for additional direction.
Data from New Zealand showed that Gross Domestic Product (GDP) expanded by 1.1% quarter-on-quarter in Q3, following a revised 1.0% contraction in the previous quarter. While the rebound points to broad-based strength across key sectors, the upbeat figures failed to provide lasting support for the Kiwi. Analysts at BBH noted that the Reserve Bank of New Zealand (RBNZ) continues to signal that the policy rate is likely to remain at 2.25% through 2026, keeping the currency largely range-bound in the near term.
Meanwhile, a softer-than-expected US inflation report has revived speculation that the US Federal Reserve (Fed) could proceed with interest rate cuts in early 2026. That said, Fed officials have emphasized the need for further “clean” economic data following recent shutdown-related distortions, a stance that could help limit downside pressure on the Greenback and cap losses in NZD/USD.
According to the CME FedWatch Tool, financial markets are currently pricing in nearly a 26.6% probability of a US rate cut at the Fed’s January meeting, after the central bank delivered quarter-point reductions at each of its previous three policy meetings.
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