Kiwi Gains as US-China Truce Extension Counters Fed Signals

Key Moments

NZD/USD Rises on Improved US-China Trade Outlook

The NZD/USD pair gained traction to trade around 0.5665 during Monday’s Asian session, with the New Zealand Dollar strengthening against the US Dollar. The move came as investors responded to encouraging signs from recent US-China trade discussions, a key driver for the China-sensitive Kiwi.

China’s Commerce Ministry stated on Monday that the existing trade ceasefire with the United States will be prolonged until January 2027. In addition, Beijing and Washington agreed to form a China-US Trade Council under their bilateral consultation mechanism following the eighth round of economic and trade talks. Both sides also committed to setting up a communication channel for AI-related incidents and to continue negotiations on increasing the number of China-US flights.

Fed Officials Maintain Hawkish Tone, Supporting the Dollar

While the Kiwi found support from trade headlines, the US Dollar remained underpinned by firm rhetoric from Federal Reserve policymakers, which has reinforced expectations for additional tightening.

Cleveland Fed President Beth Hammack commented on Friday that inflation risks remain elevated and that restrictive monetary policy should stay in place. Richmond Fed President Tom Barkin and Boston Fed President Susan Collins also backed the latest rate increase, citing persistent inflation concerns.

According to the CME FedWatch tool, market participants are assigning a 65.9% probability to a Fed rate hike in October and a 94.3% chance of one in December.

RBNZ Hawkishness Lifts Kiwi as October Hike Odds Climb

Strategists at Brown Brothers Harriman observed that the New Zealand Dollar is “outperforming most major currencies” after Reserve Bank of New Zealand Governor Anna Breman delivered a notably hawkish message. BBH indicated that her remarks have boosted market-implied odds of “a 25bps hike to 3.00% at the next October 28 meeting” from 57% to 73%.

BBH also pointed out that Breman highlighted inflation risks from energy markets, noting that “if higher oil prices persist, they are expected to result in somewhat higher near-term inflation than we assumed in the September Statement.” Against this backdrop, investors are focused on New Zealand’s Q3 CPI data due on October 21, with the RBNZ currently projecting headline CPI inflation to “ease to 3.9% y/y vs. 4.1% in Q2.”

Fed Sentiment: Hammack Warns on Inflation Mindset

Fed’s Hammack delivered what was characterized as a moderately hawkish set of remarks, reflected in a FXS Speechtracker score of 7.2/10, slightly lower than the 7.5/10 historical average but still indicating a strong anti-inflation bias. The focus on the “biggest risk” being the development of an inflationary mindset, together with worries about demand and capital expenditure pressures, highlighted the priority of preventing entrenched inflation expectations even as growth and labor market conditions remain solid.

Her view that policy needs to remain in a restrictive setting to bring inflation down supports a preference for tighter financial conditions over any swift shift toward easing. Following the speech, the FXS Fed Sentiment Index slipped by 0.34 points to 147.72, signaling a modest easing in hawkish intensity. Nonetheless, the level stayed well above the neutral mark of 100, indicating that overall Fed communication continues to lean clearly hawkish, even if slightly softer than the recent baseline captured by the FXS Speechtracker.

NZD/USD Intraday Technical Picture

On the fifteen-minute chart, NZD/USD maintains a mildly bullish short-term tone, with spot prices holding above the 100-period moving average and the middle band of the Bollinger Bands. The pair is testing the upper Bollinger band area near 0.5669, while the 14-period Relative Strength Index, at roughly 61, points to constructive but not overstretched upside momentum.

Key intraday levels can be summarized as follows:

A decisive break above resistance near 0.5670 would clear the path for additional short-term gains. Failure to overcome that zone could trigger a pullback toward the layered support area around the 100-period moving average, the middle band, and then the lower band.