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2025-10-31 13:26:15
[Australian and New Zealand dollars extend their decline as lower expectations for a December Fed rate cut support the US dollar] 1. The market lowered its expectations for a December Fed rate cut, and the US dollar held firm, hovering near its near three-month high reached overnight. The Australian and New Zealand dollars extended their losses on Friday. 2. The Australian dollar is currently down 0.15% to US$0.6544, after falling 0.3% overnight, marking its second consecutive day of decline. It is some distance from its three-week high of US$0.6617, but is still on track for a 0.5% gain this week. The New Zealand dollar is currently down 0.28% to around US$0.5724, having also closed lower for two consecutive trading days. 3. A strong domestic inflation report dampened hopes for a Reserve Bank of Australia (RBA) rate cut this year, supporting the relative strength of the Australian dollar. The Australian dollar is up 0.23% against the New Zealand dollar, and about 0.9% so far this week. 4. The market views the probability of the RBA cutting rates by 25 basis points to 3.35% on November 4th as near zero, with all economists surveyed expecting a 3.60% rate cut. The benchmark interest rate is expected to bottom out at 3.35% by mid-next year. 5. Westpac's chief economist, Luci Ellis, stated that policy remains restrictive, and there is reason to cut rates by 25 basis points twice more next year, the first time as early as May, and the second in August. CBA believes the easing cycle has ended, while NAB and ANZ expect one rate cut next year. 6. Additionally, investors expect the Reserve Bank of New Zealand to cut rates by 25 basis points to 2.25% in November, and the expectation of a 50 basis point cut has largely disappeared.
