NZD/USD tumbles below 0.5850 amid caution ahead of US NFP data

• NZD/USD plunges below 0.5850 amid dismal risk tone and firm RBNZ dovish bets.
• The US Dollar edges higher ahead of the US NFP data for November.
• Economists estimate the US jobless rate to have accelerated to 4.2%.

The NZD/USD pair plummets below the key support of 0.5850 in European trading hours on Friday. The Kiwi pair plunges as the New Zealand Dollar (NZD) weakens across the board amid firm expectations that the Reserve Bank of New Zealand (RBNZ) will follow an aggressive policy-easing approach.

The RBNZ reduced its Official Cash Rate (OCR) by 50 basis points (bps) to 4.25% in its monetary policy meeting on November 27 and guided for similar rate cut pace if economic conditions continue to evolve as projected. Traders are also confident the RBNZ will cut its OCR again by 50 bps to 3.75% in the February policy meeting.

Meanwhile, cautious market mood ahead of the United States (US) Nonfarm Payrolls (NFP) data release has also weighed on the Kiwi dollar. S&P 500 futures exhibit a subdued performance in European session. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks higher from the key support of 105.70.

The US NFP data will influence market expectations about whether the Federal Reserve (Fed) will cut interest rates again in the policy meeting on December 18. The Fed has already reduced its key borrowing rates by 75 bps in its meetings in September and November.

Economists expect the US economy added 200K fresh workers, significantly higher than 12K in October. Payrolls were significantly lower last month as some industries were affected by the hurricanes and there were labor strikes at Boeing plants. The Unemployment Rate is estimated to have accelerated to 4.2% from the former release of 4.1%.