Below 0.5600: New Zealand Dollar falls as traders prepare for US PPI data

• 0.5545 in Focus as NZD/USD Slips in Early Asian Trading on Friday
• Increased rate-hike bets lend support to the US Dollar.
• Higher unemployment in New Zealand tempers market expectations for further RBNZ rate increases. 

NZD/USD falls towards 0.5545. The decline comes during Friday’s Asian session as mounting expectations of a larger December rate increase by the Federal Reserve (Fed) underpin the US Dollar (USD). This leaves the pair under pressure ahead of US October Producer Price Index (PPI) figures, due later on Friday.

Expectations of successive interest-rate increases have strengthened as US inflation persists and Fed officials maintain a hawkish stance. A 50-basis-point increase should be considered if core inflation stays elevated, Fed Governor Christopher Waller said.

According to the CME FedWatch tool, traders assign nearly an 85.5% probability to a Fed rate increase at its next meeting on 8-9 December. The likelihood of a half-point increase stands at 14.5%.

Friday’s main data focus is the US October PPI inflation release. Forecasts put annual headline PPI growth at 6.6% YoY in October and core PPI growth at 5.0% YoY for the same reporting period. Stronger-than-expected readings could give the Greenback a lift.

At 5.7%, New Zealand’s Unemployment Rate reached an 11-year high. The weak labour figures have curbed expectations of aggressive RBNZ rate increases, adding pressure on the Kiwi.

G10 Lead for Kiwi as RBNZ Mandate Risk Eases; Korean Won Outperforms

Brown Brothers Harriman analysts describe the currency moves as follows: "NZD tops the G10 FX leaderboard." They also highlight that "KRW is outperforming across the board on Korean exporters’ dollar selling," and characterise the effect of New Zealand’s preliminary election result in these terms: "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."

On the election outcome, Brown Brothers Harriman states: "New Zealand's ruling center-right coalition holds a one seat majority following Sunday’s election, with final results due November 27." The National Party-led incumbent coalition "wants to stick to the RBNZ’s sole price stability mandate which has been in place since December 2023," the analysts say. They contrast this with the opposition’s position: "The Labour Party, meanwhile, ran on a proposal to return to a dual inflation-employment mandate." The difference in policy is viewed as a significant backdrop to the Kiwi’s current outperformance.

7/10 Williams Speech Score: US Resilience Meets Unfinished Inflation Fight

A 7/10 FXS Speechtracker score, against a historical average of 6.1/10, marks a moderately more hawkish tone from the Fed’s Williams. His remarks convey confidence in robust, resilient growth that is “strengthening but not overheating.” Yet inflation is described as “stubbornly persistent and elevated,” and the central bank “still has work to do” to bring it back to 2% over time. Together, these messages maintain a steady tightening bias. Williams also makes clear that policy aims to lower the inflation rate, not reverse the overall price level, which could damage economic conditions.

Despite the speech’s stronger-than-baseline tone on the FXS Speechtracker, the FXS Fed Sentiment Index edged down 0.08 points to 147.47. This indicates a modest easing in perceived hawkishness. The reading remains comfortably above the neutral 100 level, keeping the Fed firmly in hawkish territory. Nevertheless, the marginal moderation in sentiment suggests a more measured course for future Dollar policy adjustments.

100-Day SMA Caps NZD/USD: Technical Outlook Stays Bearish

On the daily chart, the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-day middle line now act as upside barriers as NZD/USD continues to retreat beneath them. Trading in the lower half of the Bollinger envelope sustains the near-term bearish bias. At 37.5, the Relative Strength Index (RSI) remains below the neutral 50 level, pointing to persistent selling pressure rather than exhaustion in oversold territory.

The lower Bollinger band near 0.5525 offers the first downside support, where sellers may pause to review their positions. Any recovery would initially face the middle band around 0.5630, then the upper band at 0.5730. Further above, the 100-day SMA at 0.5750 remains a bearish barrier. A move back above it would be needed to ease the prevailing negative tone.

(The technical analysis of this story was written with the help of an AI tool. Know more.)