The NZD/USD pair is seeing small losses, trading around 0.5790 during Wednesday’s Asian session. This decline follows a 5.8% monthly rise in New Zealand’s Building Permits for August, which is slightly up from July’s 5.3% increase. Adding to the NZD/USD’s struggles is the looming U.S. government shutdown, set to occur at 04:00 GMT on Wednesday due to expired funding. About 750,000 employees might face furloughs because Congress hasn’t passed the funding bills, which could impact important data releases like the monthly jobs report.

US Dollar Market Expectations

Even with these challenges, the U.S. Dollar remains weak as softer jobs data increases expectations for interest rate cuts by the Federal Reserve. According to the CME FedWatch Tool, there is a 97% chance of a rate cut in October and a 76% chance in December. Job openings data shows a slowing labor market in the U.S., with vacancies climbing slightly to 7.23 million in August while hiring fell to 3.2%. The New Zealand Dollar is heavily affected by China’s economic health and dairy prices because of its trade dependencies. The Reserve Bank of New Zealand aims to keep inflation between 1% and 3%. It adjusts interest rates to manage inflation and influence bond yields, which in turn affects the NZD/USD pair. Economic data from New Zealand can also impact the NZD’s value based on the country’s economic conditions. With the U.S. government shutdown starting today, we expect increased volatility and lower liquidity in the markets. The pause in critical data releases, especially the monthly jobs report, will leave traders without important economic guidance. This uncertainty suggests traders should brace for erratic price swings influenced more by news than by fundamentals.

Strategies for Traders

The main trend for the U.S. Dollar is the Federal Reserve’s more cautious approach, with markets nearly certain of a rate cut this month. This is in contrast to the Reserve Bank of New Zealand, which is facing more persistent domestic inflation, with the last reading at 3.5% year-over-year for the third quarter of 2025. This policy difference could offer some support for the NZD/USD pair. Given the uncertainty created by the shutdown, derivative traders might consider strategies that benefit from increasing volatility. Buying options, like straddles or strangles, could effectively capture significant price changes once the shutdown ends and data releases resume. We think this is a time to trade on volatility rather than take a strong directional position. However, the New Zealand Dollar has its own challenges that could limit any strong rallies. China’s shaky economic recovery, as reflected by the latest Caixin Manufacturing PMI remaining just above the 50 mark, continues to pressure the Kiwi. Additionally, recent Global Dairy Trade auctions have shown only weak price gains, providing little boost to New Zealand’s largest export. Historically, during past government shutdowns like late 2018, the U.S. Dollar has often shown volatile, sideways movements before establishing a clear trend post-resolution. Therefore, our main stance is to seek opportunities to position for U.S. Dollar weakness, but to do so with caution. Using any panic from the shutdown that strengthens the U.S. Dollar as a chance to enter long NZD/USD positions could be wise once the political landscape stabilizes. Create your live VT Markets account and start trading now.

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