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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 indication of the central bank's stance on interest rates during a speech on Friday, saying he does not 'prejudge' rate decisions. Warsh's remarks in Bangkok indicated a cautious approach to monetary policy.
The US Producer Price Index (PPI) rose by 6.3% year-on-year in September, compared to a rise of 5.6% in August, according to the Bureau of Labor Statistics. This increase in inflation data has increased the odds of a rate hike, with traders now pricing in a 27.7% probability of an October hike, up from 41.5% earlier in the month.
Warsh's speech scored 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. He emphasized the Fed's commitment to delivering price stability, indicating a focus on inflation.
The New Zealand Dollar (NZD) rose to near 0.5650 on Friday, as Warsh's remarks contributed to the NZD's strength against the US Dollar (USD). The US Dollar Index (DXY) gained to 99.60 mark on Tuesday, and the bond market drove the move.
The US Dollar faces some selling pressure against the New Zealand Dollar following Warsh's remarks. The NZD/USD pair rises to around 0.5650 during the Asian trading hours on Friday.
On the topside, initial resistance emerges at the upper Bollinger Band around 0.5710, with a more significant barrier at the 100-period MA at 0.5780; as long as NZD/USD remains under these levels, rallies are likely to be treated as corrective rather than the start of a sustained uptrend.
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. This uncertainty has contributed to the NZD's strength against the USD.
Warsh's cautious stance has reduced the likelihood of a 25 basis point rate increase at the October meeting to around 60%, according to market expectations. 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.
What this adds
The New Zealand Dollar's rise to near 0.5650 on Friday marks a significant move, influenced by Warsh's cautious approach to monetary policy and the uncertainty surrounding the October meeting. The technical analysis of this story was written with the help of an AI tool.
Background
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.
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.
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
- 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.
- 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.
- 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.
- This figure registered the largest increase since 2022 and was higher than the expectation of an increase of 5.3%.