NZD/USD remains subdued around 0.5750 following Business NZ PMI release

• NZD/USD faces challenges as Business NZ PMI remained steady at 49.9 in September.
• The New Zealand Dollar struggles as traders expect the RBNZ to deliver a 25 bps rate cut in November.
• The US Dollar could further advance as risk aversion increases amid the ongoing government shutdown.

NZD/USD remains weaker for the fourth successive session, trading around 0.5750 during the Asian hours on Friday. The pair holds losses following September's Business NZ Performance of Manufacturing Index (PMI), which held steady at 49.9, remaining in contraction.

The New Zealand Dollar (NZD) depreciated against the US Dollar (USD) after the Reserve Bank of New Zealand (RBNZ) decided on a larger-than-expected rate cut on Wednesday. The central bank cut its Official Cash Rate by 50 bps to 2.50%, the lowest level since July 2022, with rising market expectations of a 25 bps rate cut in November.

The NZD/USD pair also faced challenges as the US Dollar (USD) could receive further support from increased risk aversion, driven by the ongoing government shutdown. The US Senate remained deadlocked on legislation to end the government shutdown.

However, the prevailing dovish sentiment on the US Federal Reserve's policy outlook could weigh on the Dollar and support the NZD/USD pair. Fed Bank of San Francisco President Mary Daly said on late Thursday that inflation has come in much less than she had feared. Daly further stated that the US central bank is projecting additional cuts in risk management.

Fed Governor Michael Barr said that the current outlook poses challenges for judging the stance of monetary policy and deciding the right path forward. Barr also noted that the Fed's rate cut in September was appropriate, and the current policy rate is still modestly restrictive. He added that it's hard to judge at this point whether the federal government shutdown will leave an imprint on the overall economy.