NZD Falls as Warsh Signals Tighter US Monetary Policy
The New Zealand Dollar (NZD) fell against the US Dollar (USD) on Friday, down 0.3% to trade around 0.5710. The weakness of the NZD comes as the USD regains strength, supported by a hawkish tone adopted by Federal Reserve Chair Kevin Warsh.
Warsh highlighted that inflation remains uncomfortably high and argued that economic data released over the summer failed to show sufficiently convincing structural improvement. This fuels expectations of tighter monetary policy, supporting the US Dollar and exerting downward pressure on NZD/USD.
The CME FedWatch Tool shows that markets now assign a 53% chance to an interest rate hike at the Fed's October meeting, up from 44% a day earlier. This repricing of the US interest rate outlook favors the Greenback as investors factor in the possibility that restrictive monetary conditions could remain in place for longer.