• NZD/USD weakens to around 0.5545 in Friday’s early Asian
• Traders ramp up rate hike wagers, supporting the US Dollar.
• A rise in the New Zealand Unemployment Rate reduces market expectations for future RBNZ rate hikes. 

The NZD/USD pair declines to near 0.5545 during the Asian trading hours on Friday. Growing bets of a larger Federal Reserve (Fed) rate hike in December provide some support to the US Dollar (USD) and act as a headwind for the pair. Traders will keep an eye on the US October Producer Price Index (PPI) data, which is due later on Friday.

Persistent US inflation and hawkish remarks from Fed officials reinforced expectations for a series of interest-rate hikes. Fed Governor Christopher Waller said that a 50-basis-point rate hike should be considered if core inflation remains elevated.

Traders are now pricing in nearly an 85.5% odds of a Fed rate hike when the Fed next meets December 8-9 and put odds of a half-point hike at 14.5%, according to the CME FedWatch tool.

The US October PPI inflation data will take center stage on Friday. The headline PPI is expected to rise 6.6% YoY in October, while the core PPI is projected to show an increase of 5.0% YoY during the same report period. If the report shows hotter-than-expected outcomes, this could lift the Greenack.

New Zealand’s Unemployment Rate climbed to an 11-year high of 5.7%. This weak labor data has dampened bets for aggressive RBNZ rate hikes, weighing on the Kiwi.

Kiwi and Korean won outperform as RBNZ mandate risk recedes

Analysts at Brown Brothers Harriman highlight that “KRW is outperforming across the board on Korean exporters’ dollar selling,” while “NZD tops the G10 FX leaderboard.” They note that New Zealand’s preliminary election outcome has “reduces the risk the RBNZ returns to a dual inflation-employment mandate which could have tilted policy in a more dovish direction given weak labor market condition.”

According to Brown Brothers Harriman, “New Zealand’s ruling center-right coalition holds a one seat majority following Sunday’s election, with final results due November 27.” The incumbent coalition led by the National Party “wants to stick to the RBNZ’s sole price stability mandate which has been in place since December 2023,” whereas “The Labour Party, meanwhile, ran on a proposal to return to a dual inflation-employment mandate.” This policy divergence is seen as an important backdrop to the current outperformance of the Kiwi.

Williams flags resilient US economy but stresses inflation fight still unfinished

Fed’s Williams delivers a moderately more hawkish tone, with the FXS Speechtracker score at 7/10 relative to the historical average of 6.1/10, underscoring confidence in robust, resilient growth that is “strengthening but not overheating.” The emphasis that inflation remains “stubbornly persistent and elevated,” alongside the assertion that the central bank “still has work to do” and must act over time to return inflation to 2%, reinforces a steady tightening bias, while clarifying that policy targets inflation rates rather than rolling back overall price levels to avoid damaging economic conditions.

The FXS Fed Sentiment Index slipped by 0.08 points to 147.47, signaling a slight pullback in perceived hawkishness despite the stronger-than-baseline speech tone captured by the FXS Speechtracker. With the index still well above the neutral 100 mark, the Fed remains firmly in hawkish territory, even as marginal sentiment moderation hints at a more measured path for future Dollar policy adjustments.

Technical Analysis: Negative outlook of NZD/USD remains intact below the 100-day SMA

In the daily chart, NZD/USD extends its decline below the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-day middle line, which now cap the topside. This positioning keeps the near-term bias bearish, with price pressed against the lower half of the Bollinger envelope; the Relative Strength Index (RSI) at 37.5 stays below the neutral 50 mark, hinting at lingering downside pressure rather than oversold exhaustion.

On the downside, immediate support emerges at the Bollinger Bands’ lower band near 0.5525, where sellers could pause to reassess. On the topside, initial resistance stands at the Bollinger middle band around 0.5630, followed by the upper band at 0.5730, while the 100-day SMA at 0.5750 forms a more distant bearish barrier that would need to be reclaimed to soften the current negative tone.