NZD/USD rises slightly on China tariff relief amid weak NZ labor market

• NZD/USD rises slightly on Wednesday, supported by China's announcement to lift some tariffs on US agricultural products.
• New Zealand's labor data show the Unemployment Rate climbing to 5.3%, reinforcing expectations of a rate cut by the RBNZ.
• The US Dollar remains pressured by the ongoing budget deadlock in Washington, now entering its sixth week.

NZD/USD recovers on Wednesday, trading around 0.5660 at the time of writing, supported by improving global trade sentiment after China announced it would suspend part of its tariffs on US agricultural goods starting November 10. Beijing said the 24% tariffs on certain imports would be suspended for one year, while the 10% tariffs would remain in place. The decision has slightly boosted optimism for the New Zealand Dollar (NZD), which is highly sensitive to Chinese trade prospects, as China is New Zealand's largest trading partner.

Domestically, however, the Kiwi remains fragile due to weak labor market data. New Zealand's Unemployment Rate rose to 5.3% in the third quarter, the highest since 2016, while Employment Change was flat.

According to BBH analysts, the figures strengthen expectations of imminent monetary easing by the Reserve Bank of New Zealand (RBNZ), with markets fully pricing in a 25-basis-point rate cut at the November 26 meeting, and another one possible early next year. The analysts said that the data "confirm the labor market's loss of momentum and argue for additional RBNZ easing." The participation rate fell to 70.3%, while private wages increased by 0.5% quarter-on-quarter, in line with forecasts.

In the United States, the US Dollar (USD) remains weak amid the ongoing political stalemate in Washington. The lack of a federal funding agreement has kept the government partially shut down for six weeks, potentially becoming the longest in history. This situation, combined with a moderate rebound in the Institute for Supply Management's (ISM) Services Purchasing Managers Index (PMI) to 52.4 and continued resilience in the labor market, keeps investors cautious. According to the CME FedWatch tool, markets now assign a 62% chance of another Federal Reserve (Fed) rate cut in December.