The New Zealand Dollar is trading below 0.5800, even after three days of gains. It is currently around 0.5780, showing little change, as the US Dollar receives minor support following an earthquake in Japan. All eyes are on the Federal Reserve, which is expected to announce a 25 basis-point rate cut with careful messaging. Strong trade data from China is also helping the New Zealand Dollar, as exports rose by 5.9% year-on-year in November.

Mixed Signals From The US

In the US, the Dollar remains low despite a recent increase. Job data provides mixed signals; the ADP report shows an average of 4,750 jobs created weekly, while the JOLTS report indicates a slight rise in job vacancies. These signs of a slowing job market raise concerns about economic strength, leading to speculation that the Fed might reconsider its easy monetary policy. Internal disagreements within the Federal Open Market Committee suggest that more rate cuts could happen by 2026. Currently, the New Zealand Dollar is holding strong against major currencies, especially the Japanese Yen. However, various factors, including the Federal Reserve’s decisions, continue to impact its path.

Federal Reserve’s Impact On The Market

The market is largely inactive as we wait for the Federal Reserve’s decision tomorrow. A 25-basis-point rate cut is expected, but the emphasis will be on the likely “hawkish” message. This has capped the NZD/USD, keeping it just below 0.5800. The latest US Consumer Price Index data for November 2025 shows inflation at 2.8%, suggesting that the Fed needs to signal a pause for early 2026. This indicates that any further easing will be slow, making simple spot trades risky. Buying puts with a strike price around 0.5700 could be a smart way to hedge against a sharp drop in the Kiwi. On a positive note, the New Zealand Dollar is getting solid support from recent trade data from China. The reported $75 billion trade surplus for November, driven by a 5.9% annual increase in exports, significantly boosts New Zealand’s economic outlook. This underlying strength is why the Kiwi hasn’t dropped more, despite the USD’s stability before the Fed meeting. One-week implied volatility for NZD/USD has surged to over 12%, its highest level since the market upheaval in early 2025. This suggests traders are anticipating a big move, but it also presents a chance. If the Fed acts as expected and the market doesn’t react, selling strangles could be a profitable strategy as volatility decreases. Looking beyond tomorrow’s meeting, the updated “dot plot” will be key to understanding the Fed’s plans for 2026. We remember how the market misjudged a quick easing cycle back in 2024, only to be caught off guard by the Fed’s patience. Any hints about a potential successor to Chairman Powell next May will only increase this long-term uncertainty. Create your live VT Markets account and start trading now.

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