The NZD/USD currency pair settled above Friday’s low of 0.5578, its weakest level since April 9th, after stronger-than-expected US employment data added to expectations that the Federal Reserve would abstain from lowering borrowing costs in December.
Employers in all sectors of the US economy, excluding farming, added 119,000 job positions in September, well above market consensus of 50,000.
Markets are now pricing in about a 35% chance of a 25 basis point Fed rate cut in December, compared to a 44% chance a week earlier.
An increasing number of Fed officials have signaled reticence on further rate cuts due to inflation concerns and indications of relative stability in the US labor market.
This week, Chicago Fed President Austan Goolsbee said he was “uneasy” about frontloading rate cuts, with progress on inflation moving towards the 2% target looking to have stalled.
The minutes from the Federal Reserve’s October meeting revealed that interest rates had been lowered even as policy makers cautioned that such a move could risk entrenched inflation and a loss of public trust in the financial institution.
Meanwhile, the latest data out of New Zealand showed that the nation’s trade deficit had narrowed to NZD 1.5 billion in October from NZD 1.65 billion in the same month a year ago.
Exports grew 16% YoY to NZD 6.5 billion, while imports rose 11% YoY to NZD 8.0 billion.
The Forex pair lost 1.21% for the week.
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