NZD/USD Continues to Hold Gains Near YTD Peak, Above Mid-0.6300s, Amid Chinese Stimulus

• NZD/USD hits a new YTD peak on Monday amid optimism about more stimulus from China.
• Geopolitical risks lend some support to the safe haven and are a headwind for the pair.
• Traders are looking forward to Fed Chairman Jerome Powell’s speech to seize near-term opportunities.

The NZD/USD pair is attracting some buyers for the third day in a row, climbing to a new year-to-date (YTD) peak around the 0.6375 region during the Asian session on Monday.

Against the backdrop of a slew of stimulus measures announced last week, the People’s Bank of China (PBOC) said on Sunday it would tell banks to cut mortgage rates on existing home loans by October 31. The move adds further impetus to the already optimistic market mood and is proving to be a key factor benefiting the risk-sensitive Kiwi. Apart from this, the subdued price action of the US dollar (USD), amid subdued expectations from the Federal Reserve (Fed), appears to be further supporting the NZD/USD pair.

According to the CME Group’s FedWatch Tool, markets are currently pricing in a greater than 50% chance of another excessive rate cut by the US central bank in November. This leaves the USD Index (DXY), which tracks the greenback against a basket of currencies, near its lowest level since July 2023 last week. That said, the risk of further escalation of the Middle East conflict and war in the region appears to support the safe haven, limiting the upside for the NZD/USD pair.

Meanwhile, the mixed PMI numbers released from China earlier today do little to impress bulls or provide any momentum. In fact, the official Manufacturing PMI improved from 49.1 to 49.8 in September, beating expectations of 49.5, while the NBS Non-Manufacturing PMI unexpectedly fell to 50.0 from 50.3 in August . China’s Caixin Manufacturing PMI fell to 49.3 in September from 50.4 in the previous month, and the Caixin Services PMI fell to 50.3 in the reported month from 51.6 in August.

Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is pointing upwards, supporting the prospects for an extension of the three-week-old uptrend. Investors are now looking forward to the release of the Chicago PMI, due later in the early North American session, although the focus will remain on Fed Chairman Jerome Powell’s speech. This, along with broader risk sentiment, will boost demand for USD and allow traders to seize short-term opportunities around the NZD/USD pair.