Ray Attrill, head of FX strategy at National Australia Bank, noted that skepticism is growing about China’s commitment to meaningful fiscal support. This uncertainty has significantly impacted the Australian and New Zealand currencies this week.
Chinese Economic Concerns Intensify Aussie Dollar Pressure
Chinese stocks dropped sharply on Tuesday, continuing a downward trend after a rally fueled by unmet stimulus hopes. The Chinese finance ministry announced plans to increase borrowing but did not specify timing or amounts. A press conference is set for Thursday to discuss the “steady and healthy” development of the property sector.
New Zealand’s Inflation and Monetary Policy Outlook
In New Zealand, speculation is rising that the RBNZ may cut rates by as much as 75 basis points. Statistics New Zealand reported that annual inflation fell to 2.2% in the third quarter, returning to the RBNZ’s target range of 1% to 3% for the first time since March 2021.
US Dollar Stability Amidst Aussie Dollar Pressure
The US dollar index, which measures the currency against six major rivals, remained steady at 103.25. This level is close to Monday’s high of 103.61, the highest since August 8. Recent data show a resilient US economy. Inflation slightly above expectations in September has led traders to reduce bets on aggressive Federal Reserve easing.
Currently, traders assign about 94% odds to a 25-basis-point cut during the Fed’s next policy decision on November 7. Only 6% believe there will be no change. A month earlier, traders saw a 27% probability for a substantial 50-basis-point reduction.
The dollar also remained largely unchanged at 149.135 yen, near Monday’s high of 149.98 yen, marking the strongest level since August 1. Meanwhile, the euro dipped 0.05% to $1.08875, reaching a low of $1.0882, the weakest point since August 8. The European Central Bank will decide on policy Thursday, with markets almost certain of a quarter-point interest rate cut.
