New Zealand Dollar declines amid risk aversion, RBNZ rate cut expectations

• The New Zealand Dollar declines sharply on Wednesday as global risk aversion intensifies.
• Softer producer price data strengthens expectations of an RBNZ rate cut next week.
• Investors await the release of the FOMC minutes, while the US Dollar stays supported by safe-haven flows.

NZD/USD trades around 0.5600 at the time of writing on Wednesday, down 1.10% on the day, hitting a new eight-month low as disappointing New Zealand data and a broader deterioration in risk sentiment weigh heavily on the currency.

The New Zealand Dollar (NZD) remains under pressure following weaker-than-expected Producer Price Index (PPI) figures. According to the official statistics agency, Input prices rose only 0.2% in the third quarter, down from 0.6% previously and well below the 0.9% expected. Output prices increased by 0.6%, missing expectations of a slight acceleration. These releases follow recent comments from the Reserve Bank of New Zealand (RBNZ) indicating that inflation expectations are now anchored near 2% and that unemployment climbed to 5.3% in Q3, its highest level in nine years. These factors strengthen market expectations for a rate cut at next week's meeting.

In the United States (US), recent data have not painted a particularly positive macroeconomic picture, yet the US Dollar (USD) is benefiting from safe-haven inflows as global uncertainty rises. This week's Initial Jobless Claims and ADP employment numbers have added to signs of a cooling US labor market, supporting expectations that the Federal Reserve (Fed) could cut interest rates in December. For now, the US Dollar remains well supported as investors adopt a cautious stance ahead of the release of the Federal Open Market Committee (FOMC) minutes later in the day and, above all, Thursday's delayed Nonfarm Payrolls (NFP) report for September.