NZD/USD extends downside to near 0.5850 on stronger US Dollar, dovish RBNZ expectations

• NZD/USD weakens to around 0.5855 in Friday’s early Asian session, down 0.18% on the day. 
• The US weekly jobless claims declined to a seven-month low.
• The RBNZ is expected to cut its interest rates by 50 bps next week. 

The NZD/USD pair trades in negative territory for the third consecutive day near 0.5855 during the early Asian session on Friday. The firmer US Dollar (USD) to the fresh 2024 tops drags the pair lower. Later on Friday, the flash US S&P Global Purchasing Managers Index (PMI) data and the final Michigan Consumer Sentiment will be released. 

Data released by the US Department of Labor on Thursday showed that the Initial Jobless Claims fell to 213,000 for the week ending November 16, down from 219,000 (revised from 217,000) in the previous week and below the forecast of 220,000. This upbeat data suggested that the labor market remains strong and the Federal Reserve (Fed) could achieve a soft landing. 

Fed Chair Jerome Powell signaled last week that the Fed isn’t necessarily inclined to cut rates at the next upcoming meetings. “The economy is not sending any signals that we need to be in a hurry to lower rates,” said Powell. Meanwhile, Chicago Fed President Austan Goolsbee said on Thursday that it may make sense to slow the pace of Fed rate cuts as inflation is on its way down to 2%. The cautious stance from the Fed continues to underpin the Greenback and acts as a headwind for NZD/USD. 

On the Kiwi front, the rising bets that the Reserve Bank of New Zealand (RBNZ) will lower interest rates by 50 basis points (bps) next week might exert some selling pressure on the New Zealand Dollar (NZD). "The economy is growing sluggishly at best, and the labor market is pretty weak. So that sets up the RBNZ next week to deliver another 50 basis point cut, the same as we saw in October," said Shannon Nicoll, associate economist at Moody's Analytics.