• NZD/USD continues its downward trend, touching the 0.5890s amid a hawkish pivot from the US Federal Reserve Chair.
• Market expectations for a Fed rate cut shift further into 2024, reflecting in a 0.35% rise in the US Dollar Index.
• New Zealand's Business PMI contraction adds to economic headwinds, with potential implications for a deeper manufacturing sector decline.

NZD/USD drops to a four-day low, extending its losses in the week to more than 1.70%, and exchanges hands at around 0.5890s as the Asian session begins.

Kiwi's weekly decline exceeds 1.70%, with the USD gaining on Fed Chair's comments and rising Treasury yields

The US Federal Reserve Chair Jerome Powell pushed back against market participants' dovish perception following the US central bank decision to hold rates on November 1. He said that Fed officials “are not confident” the policy is sufficiently restrictive. Powell reiterates the Fed “is committed to achieving a stance of monetary policy” that could bring inflation down to its 2% goal.

The swaps market scaled back expectations the Fed would cut rates from May to June 2024 as US Treasury bond yields rose ten basis points. The US Dollar Index (DXY), which measures the Greenback’s value against a basket of peers, climbs 0.35%, and stands at 105.89.

Earlier before Wall Street opened, the US Bureau of Labor Statistics (BLS) revealed that unemployment claims for the week ending November 4 rose 217,000, below forecasts of 218,000 and the previous reading of 220,000. Continuing claims, which track the number of people already receiving government unemployment benefits, increased to 1’834,000 million, above the 1’820,000 until October 28.

The New Zealand economic docket recently featured Business PMI for October at 42.5, below September’s 45.3. According to the Bank of New Zealand, “GDP forecasts already include a decline in the manufacturing sector in the second half of 2023. There’s a chance that decline is bigger than we think if the PMI does not bounce in the final months of the year."