Anna 
NZD/USD maintained a position around 0.6350 during European trading on Friday, showing resilience near the five-month high of 0.6369 established on Thursday. The current market sentiment reflects expectations of a potential rate cut by the Federal Reserve (Fed) in the first quarter of 2024, contributing to the downward pressure on U.S. yields. The U.S. dollar index (DXY) is trading lower around 101.20, with 2-year and 10-year Treasury yields at 4.26% and 3.83%, respectively, at the time of reporting.
Market participants are anticipating the Reserve Bank of New Zealand (RBNZ) to maintain its hawkish stance and refrain from adopting easing policies in its upcoming meeting. Positive data, including robust consumer confidence and business confidence figures for November, have added support to this sentiment. The collective impact of these factors has fostered a positive outlook for the New Zealand dollar, reflecting confidence in the RBNZ’s commitment to a hawkish policy direction.
RBNZ Governor Adrian Orr’s cautious approach and awareness of challenges, particularly in addressing high inflation, underscore the intricacies of the economic landscape. Analysts from ANZ anticipate a resurgence in global risk appetite, combined with the New Zealand dollar’s advantageous interest rate differentials, to propel upward momentum for the currency throughout 2024.
Looking ahead, the New Zealand dollar’s agenda for the coming week does not include significant data releases, with attention shifting to China’s Caixin Manufacturing Purchasing Managers’ Index scheduled for Tuesday. The close economic ties between China and New Zealand lend importance to this indicator. Meanwhile, in the United States, focus is directed towards the release of the Chicago Purchasing Managers Index (PMI) for December on Friday, which will be closely monitored for its potential impact on market dynamics.
