NZD/USD hits seven-month low amid weak China data, hawkish Fed

• The New Zealand Dollar declines as disappointing Chinese manufacturing data weighs on market sentiment.
• Federal Reserve Chair Powell says another rate cut in December is not a foregone conclusion.
• The US Dollar remains supported despite concerns over the prolonged government shutdown.

NZD/USD weakens on Tuesday, trading around 0.5660 at the time of writing, down 0.80% for the day and reaching its lowest level in seven months earlier. The New Zealand Dollar (NZD) is under pressure amid signs of cooling momentum in China's manufacturing sector, a key export market for New Zealand, and a more hawkish tone from the Federal Reserve (Fed).

Data released Monday showed that China's Manufacturing Purchasing Managers' Index (PMI) fell to 50.6 in October, down from 51.2 in September and below expectations of 50.9. The weaker reading signals a loss of industrial momentum and weighs on growth-linked currencies such as the Kiwi.

Meanwhile, the Fed delivered its second rate cut of the year last week, lowering the federal funds rate to a range of 3.75%-4.00%. However, Fed Chair Jerome Powell stated that an additional reduction at the December meeting "is not a foregone conclusion," a remark perceived as hawkish by investors. Market expectations for another cut have dropped from around 93% to 70%, according to the CME FedWatch tool, lending support to the US Dollar (USD).

At the same time, the US government shutdown, now entering its sixth week, continues to weigh on overall sentiment. The prolonged budget stalemate between Republicans and Democrats raises concerns about economic disruption, though the US Dollar remains firm, bolstered by the Fed's cautious stance and continued signs of weakness in domestic manufacturing activity. October's Institute for Supply Management's (ISM) Manufacturing PMI declined to 48.7, marking the eighth consecutive month of contraction.

Markets now turn their attention to upcoming New Zealand labor market data and PMI figures due later in the day for fresh guidance on the pair's near-term direction.