• NZD/USD struggles as traders expect the RBNZ to deliver a 25-basis-point rate cut in November.
• The CME FedWatch Tool suggests pricing in a 71% chance of a 25-basis-point Fed rate cut in December.
• Fed’s Williams said that policymakers could still cut rates in the “near term.”

NZD/USD loses ground after registering modest gains in the previous session, trading around 0.5610 during the European hours on Monday. The pair depreciates as the New Zealand Dollar struggles on dovish sentiment surrounding the Reserve Bank of New Zealand (RBNZ) policy outlook. Traders expect the RBNZ to deliver a 25-basis-point rate cut at the November meeting on Wednesday.

Markets are also assigning a small probability to another surprise 50 bps move, similar to the October decision, given the backdrop of elevated unemployment and a sluggish economy. However, traders will be focused on the central bank’s guidance following the decision.

However, the downside of the NZD/USD pair could be restrained as the US Dollar (USD) struggles amid renewed expectations of a Fed rate cut in December. The CME FedWatch Tool suggests that markets are now pricing in a 71% chance that the Fed will cut its benchmark overnight borrowing rate by 25 basis points (bps) at its December meeting, up from 42% probability that markets priced a week ago.

New York Fed President John Williams said on Friday that policymakers could still cut rates in the “near-term,” a remark that lifted market odds for a December move. Moreover, Fed Governor Stephen Miran said that Nonfarm Payrolls data supports a December rate cut, adding that if his vote were decisive, he “would vote for a 25 bps cut.” However, Boston Fed President Susan Collins said she has not yet made up her mind on a potential move.