NZD/USD reaches six-month lows near 0.5600 due to dovish RBNZ policy outlook

• NZD/USD has recorded a six-month low of 0.5609 on Friday.
• The New Zealand Dollar loses ground amid expectations of further RBNZ policy easing in November.
• The US Dollar holds gains as market caution increases ahead of the flash Michigan Consumer Sentiment Index data.

NZD/USD extends its losses for the second successive session, trading at a six-month low of 0.5609 during the early European hours on Friday. The pair depreciates as the New Zealand Dollar (NZD) loses ground amid expectations of further policy easing from the Reserve Bank of New Zealand (RBNZ), with markets fully pricing in a 25-basis-point rate cut in November following a weak jobs report.

The NZD also loses ground as China's Trade Balance arrived at CNY640.4 billion for October, narrowing from the previous figure of CNY645.47 billion. Any change in the Chinese economy could impact the AUD as China is a major trading partner for New Zealand.

China's Exports fell 0.8% year-over-year (YoY) in October against 8.4% in September. Meanwhile, imports rose 1.4% YoY in the reported period vs. 7.5% recorded previously. In US Dollar (USD) terms, China's Trade Surplus expanded less than expected in October. Trade Balance arrived at +90.07B versus +95.60B expected and +90.45 prior.

The downside of the NZD/USD pair could be restrained as New Zealand could receive some support from easing trade tensions between the world's two largest economies United States (US) and China. Washington moves to suspend penalties on China's shipbuilding sector. The Office of the United States (US) Trade Representative announced that it is seeking public input on a one-year suspension of tariffs on Chinese imports.

The US Dollar (USD) holds ground as traders adopt caution ahead of the preliminary Michigan Consumer Sentiment Index data on Friday, while the US government shutdown is delaying key data releases, including Nonfarm Payrolls (NFP) and the Unemployment Rate.

The US Dollar faced challenges as the Challenger Job Cuts report prompted the Federal Reserve (Fed) to lower interest rates at its December meeting. Fed funds futures traders are now pricing in a 67% chance of a cut in December, down from 62% a day ago, according to the CME FedWatch Tool.