New Zealand Dollar slips to 19-month lows at 0.5540 ahead of NFP data

• Risk aversion deepens the slide in NZD/USD, taking the pair to fresh 19-month lows around 0.5540.
• Safe-haven buying and expectations of a robust NFP release later in the day lift the US Dollar above its peers.
• Uncertainty over New Zealand's economic outlook has become a greater concern following this week's data releases.

Risk aversion is weighing heavily on the New Zealand Dollar (NZD) on Friday, while expectations of a strong US Nonfarm Payrolls (NFP) release later in the day help the US Dollar (USD) outperform other major currencies. After slipping below earlier lows around 0.5560, NZD/USD has touched 0.5539, its lowest level in 19 months, so far.

With global equity markets tumbling, investors are turning to the Greenback for safety. Sentiment has been unsettled by concerns that the Democrats' victory in the US midterm elections will bring tighter regulation of the AI industry and slow plans for new data centres.

Does New Zealand's macroeconomic data weaken the case for further RBNZ rate hikes?

This week's economic releases from New Zealand have offered the Kiwi no support against this backdrop. Rather than easing to the market forecast of 5.5%, the Unemployment Rate rose to 5.7% in the third quarter from 5.6% in the preceding quarter, alongside an unexpected fall in net employment.

The labour market figures come after consumer inflation slowed more sharply than anticipated in Q3. That slowdown might have led the Reserve Bank of New Zealand (RBNZ) to keep interest rates on hold last week, a decision that surprised markets and set off a sharp reversal in the NZD.

Further grounds for the RBNZ to refrain from additional monetary tightening could ultimately weigh on the Kiwi, Rabobank analysts indicate. They note that “despite some strong green shoots for New Zealand in Q1 2026, this was ahead of the headwinds caused by the Iran war,” highlighting the reasons the central bank might remain cautious.

By contrast, the narrative of US economic exceptionalism continues to underpin the US Dollar. Following last week's above-consensus US Gross Domestic Product (GDP) growth reading, labour market releases over recent days have strengthened expectations that October's Nonfarm Payrolls report, scheduled for later in the day, could deliver an upside surprise.

For ING analysts, a "decent jobs number today will confirm the Fed's understanding that the US jobs market is 'solid'". They add that this, in turn, "could provide some support to short-dated rates and the Dollar.”