The Kiwi’s slide has been one that hasn’t been seen in a while, with NZDUSD dropping 2% in just two sessions.
The pair had initially climbed ahead of the FOMC, driven by dovish concerns around the Fed and sudden Dollar-hedging that briefly pressured the DXY (sending the US Dollar down, hence the pair shooting upwards).
However, Powell’s balanced tone quickly flipped that narrative, erasing the priced-in dovishness observed in the SEP, dot plot, and FOMC statement.
“You can think of this, in a way, as a risk management cut,” Powell noted, striking a cautious stance around future cuts that steadied the USD.
There are still 25 bps of cuts priced at each of the two meetings left in 2025.
Strong US Jobless Claims (231k vs 240K exp) this morning reinforced that shift, further fueling a V-shaped reversal in the greenback.
Coupled with New Zealand’s atrocious GDP miss (-0.9% vs -0.3% q/q), the Kiwi was left in dismay, driving the pair sharply lower.
The current move is reflecting the repricing of more cuts for the RBNZ as the data has been very volatile for New Zealand throughout the year.
Expectations for a rate cut at the RBNZ upcoming meeting were at 82% last week and a 25 bps cut is now fully priced, with some extra premium in case of a larger 50 bps.
The NZ OCR is at 3% and the upcoming meeting will be happening on October 8th.
Let’s have a look at NZDUSD through a multi-timeframe outlook to see where this takes the major pair.