New Zealand Dollar gives back Iran-talks gain following RBNZ hold

• NZD/USD retreats towards 0.5600, reversing its entire gain from Dollar weakness.
• A 4-3 RBNZ vote to keep rates at 2.75% leaves NZD/USD lagging the Euro and the Pound.
• Tuesday brings New Zealand's third-quarter employment figures ahead of the 7 November election.

With the Reserve Bank of New Zealand (RBNZ) keeping its policy rate at 2.75%, NZD/USD has surrendered all the gains it made as the Dollar weakened. US-Iran diplomacy had pushed the Dollar and Crude Oil lower, helping the pair recover from a session low just above 0.5600 to just below 0.5650. The pair is now back just above 0.5600, beneath its level at the start of the week.

Westpac described the RBNZ's 28 October decision as a shock to the market: policymakers voted four to three to leave rates unchanged, with Governor Breman supporting the hold. With no further decision due until 9 December and the Fed's rate at 3.75%-4.00%, the interest-rate differential affecting NZD/USD will remain at least 1.00 point until then.

Despite forecasting inflation of 4.4% by year-end, up from September's 3.7%, the RBNZ opted against a rate rise. The New Zealand Dollar has also lost ground to the Australian Dollar as stronger Australian inflation has fuelled expectations of further Reserve Bank of Australia (RBA) rate increases. Against that backdrop, NZD/USD has underperformed the Euro and the Pound against the Dollar.

Jobs data and election lead the calendar

Unemployment is forecast at 5.5%, against a previous 5.6%, when New Zealand releases its third-quarter labour market figures at 21:45 GMT on Tuesday. Employment growth is expected at 0.4%, following 0.5%. These are the principal New Zealand data ahead of the RBNZ's 9 December decision; the general election takes place on Saturday, 7 November.

US October Nonfarm Payrolls (NFP), due at 13:30 GMT on Friday, are forecast at 65K, while the unemployment rate is expected to remain at 4.2%. Before that, September job openings are scheduled for 15:00 GMT on Tuesday, with a forecast of 7.13 million compared with the previous 7.079 million. Both releases inform the Fed side of the interest-rate differential affecting NZD/USD.

NZD/USD remains confined to a narrow range

Since 29 October, the day following the RBNZ decision, a half-cent range has contained NZD/USD. The preceding advance from the 14 October low just above 0.5550 had stalled just below the 50-day Exponential Moving Average (EMA). That average now sits near 0.5700, while the 200-day EMA is just below 0.5800.

NZD/USD chart: 5-minute timeframe

NZD/USD chart: daily timeframe