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NZ Dollar Rises Near 0.5650 as Fed Chair Warsh Avoids Rate Hike Preview
· Confirmed
In Short: The New Zealand Dollar rose to near 0.5650 on Friday, as Federal Reserve Chair Kevin Warsh avoided giving any preview of the central bank's October 27-28 meeting decision on interest rates.
Federal Reserve Chair Kevin Warsh gave no hint of the central bank's upcoming October 27-28 meeting decision on interest rates during a speech on Friday, leading the New Zealand Dollar (NZD) to rise to near 0.5650 against the US Dollar (USD).
Warsh's speech, which scored 5.6/10 on the FXS Speechtracker, was modestly below the established baseline of 6.1/10, indicating a slightly less impactful tone despite steady policy messaging.
The US Producer Price Index (PPI) rose by 6.3% year-on-year in September, higher than the 5.6% increase in August, according to the Bureau of Labor Statistics. This increase in inflation data has raised the odds of a rate hike, with traders now pricing in a 27.7% probability of an October hike.
The admission of being “over-scarred from the global financial crisis” underscores a cautious bias on financial stability, even as Warsh highlights structural growth and an investment surge driven by “good policies.” This suggests a guarded hawkish stance on output, employment, and inflation ahead of the October and December meetings.
On the Kiwi front, Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway said that the interest rate decision in late October is “wide open” even as inflation pressures build.
The US Dollar faces some selling pressure against the New Zealand Dollar following remarks from Federal Reserve Chair Kevin Warsh. This uncertainty has contributed to the NZD's strength against the USD.
The table below shows the percentage change of USD against listed major currencies today. For example, if you pick the USD from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The US Dollar was the strongest against the Japanese Yen, with the USD/JPY pair holding firm near the 155.00 mark, lifted by higher US yields but capped by expectations of a Bank of Japan (BoJ) hike on Friday.
What this adds
The cautious stance from Warsh has reduced the likelihood of a 25 basis point rate increase at the October meeting to around 60%, according to market expectations.
The technical analysis of this story was written with the help of an AI tool.
Background
The New Zealand Dollar (NZD) rose to near 0.5650 on Friday, as Federal Reserve Chair Kevin Warsh avoided giving any preview of the central bank's October 27-28 meeting decision on interest rates.
"We made very clear we’d deliver price stability," Warsh said Friday morning in Bangkok, indicating his focus on inflation and the likelihood of another interest rate hike in the near future.
What's confirmed
- Fed Chair Warsh’s speech scores 5.6/10 on the FXS Speechtracker, modestly below the 6.1/10 established baseline, pointing to a slightly less impactful tone despite broadly steady policy messaging.
- The admission of being “over-scarred from the global financial crisis” underscores a cautious bias on financial stability even as Warsh highlights structural growth and an investment surge driven by “good policies,” suggesting a guarded hawkish stance on output, employment, and inflation ahead of the October and December meetings.
- On the Kiwi front, Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway said that the interest rate decision in late October is “wide open” even as inflation pressures build.
- With the move largely priced in, the reaction will hinge less on the decision itself than on the updated economic projections, the dot plot, and Chair Kevin Warsh's guidance on whether more tightening is coming.
What's still developing
- The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
- The NZD/USD pair rises to around 0.5650 during the Asian trading hours on Friday.
- UBS ( NYSE:UBS ) analyst Simon Penn wrote Sept. 29, before the CPI report, that an October hike on the eve of a midterm, absent for 35 years, was “politically untenable,” and expected December.
- The FedWatch tool from CME Group ( NASDAQ:CME | CME Price Prediction ) priced an October hike at 41.5% at 12:20 PM ET on Oct.
- An October hike would produce 4.00% to 4.25%, per the Boston Globe.
- Capital Economics’ Stephen Brown called core upside broad based, putting October in play, and forecasts two more quarter-point hikes.
- The US Dollar Index (DXY) gained to 99.60 mark on Tuesday, and the bond market drove the move.
- GBP/USD stayed on the back foot near 1.3480, unable to make headway ahead of Wednesday's United Kingdom (UK) inflation report and the Fed decision.
- The 10-year United States (US) Treasury yield touched 5.04% for the first time since 2007, pulled higher by a near 4% jump in Oil as surging energy costs revived inflation worries just as the Federal Reserve (Fed) prepares to decide on rates.
- On Friday, October 16, US stocks declined as tech and AI-related shares extended losses amid concerns over Chinese semiconductor competition and debt-funded AI infrastructure expansion.
- TradingKey - On Friday, October 16, ET, US stocks moved lower as tech and artificial intelligence (AI)-related shares extended this week's losses.
- In a moderated discussion Friday morning in Bangkok at the International Monetary Fund’s annual meetings, Warsh made no remarks on monetary policy or his outlook for the US economy, apart from reiterating that the Fed will deliver price stability.