Kiwi gains as Fed rate decision hangs over Wall St

The kiwi dollar nudged higher against the greenback ahead of the Federal Reserve’s rate decision, which is expected to deliver a quarter-point cut by a divided federal open market committee, and further cementing the diverging rate tracks between the US and the likes of New Zealand and Australia.

The uncertainty in the run-up to the central bank meeting kept stock markets on both sides of the Atlantic uneasy, with Wall Street’s traditional Dow Jones Industrial Average on the rise, while the tech-heavy Nasdaq Composite was softer as Oracle’s earnings result with the software company’s debt-fuelled investment in artificial intelligence infrastructure seen as a bellwether for the burgeoning sector.

Meanwhile, Sharesies favourite Rocket Lab extended its gains as space companies rallied on a Bloomberg report that Elon Musk’s SpaceX is eyeing an initial public offering next year, while the original meme stock GameStop declined after reporting a decline in quarterly sales.

And in the antipodes, Fonterra Cooperative Group and Westpac Banking Corp are holding their annual meetings today, while Statistics New Zealand’s business financial data will give economists a chance for final tweaks in their forecasts for September quarter gross domestic product, which is shaping up to be stronger than the Reserve Bank’s projections.

Decisions, decisions

The kiwi dollar rose to 57.88 US cents at 7am in Auckland from 57.68 cents yesterday in the runup to the Federal Reserve’s latest policy review, which is expected to cut the federal funds rate 25 basis points to a range of 3.5%-to-3.75%.

The federal open market committee is said to be divided, with more hawkish members making the case to hold off lowering the benchmark rate. The dot plot path showing where each member sees interest rates in the future will be closely watched, as will chair Jerome Powell’s press conference.

“The dot plot is likely to indicate just one rate cut next year, and chair Powell is unlikely to signal another imminent cut in early 2026,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “The market prices the next full rate cut by about mid-2026, so the market seems well prepared for a pause in the easing cycle.”

Stocks on Wall Street were mixed heading into the Fed review, with the Dow Jones Industrial Average up 0.5% in late trading, led higher by Nike, American Express and Johnson & Johnson, while the S&P 500 nudged up 0.1%.

The tech-heavy Nasdaq was down 0.2%, with Nvidia and Microsoft among those weighing on the index.

New York Stock Exchange-listed Oracle’s earnings after the bell will be keenly watched for a steer on the AI sector, with the software company’s debt-fuelled spending on infrastructure increasingly being seen as a bellwether for the sustainability of the sector. The software firm was down 1.1% in late trading.

Bidding war

Meanwhile, Warner Bros Discovery rallied as investors speculate Paramount Skydance will raise its bid for the studio and network company, creating a bidding war with streaming giant Netflix.

Rocket Lab was the most traded US security by Sharesies users in the latest trading session, with New Zealand-born company up 5.8% in late trading after Bloomberg reported SpaceX is pursuing an initial public offering in 2026, where it will raise significantly more than US$30 billion and target a valuation of about US$1.5 trillion. Satellite firm EchoStar was also stronger.

Meme stock GameStop declined after the videogame retailer reported a decline in quarterly sales, and the Roundhill meme stock exchange traded fund was down 2.8% in late trading.

Stock markets across the Atlantic were mixed, with the UK’s FTSE 100 index up 0.1%, while Germany’s DAX 30 declined 0.1% and France’s CAC 40 dropped 0.4% as the Fed decision kept investors cautious.

German tourism group TUI declined after its winter bookings fell short of expectations, with European airlines warning that people are waiting longer to book their holidays. Still, TUI said summer bookings are well ahead of expectations.

New Zealand travel and tourism companies were mixed yesterday after Stats NZ figures showed visitor arrivals continued to push up towards pre-covid levels, with European visitors growing at a faster pace than US arrivals.

Australian futures are pointing to a 0.5% gain for the S&P/ASX 200 index when trading opens across the Tasman, with Westpac holding its annual meeting in Sydney today.

On this side of the Tasman, Fonterra is holding its annual meeting in Christchurch, while Stats NZ’s September quarter business finance figures are due for release. GDP data next week are expected to show the economy grew at a faster pace than the Reserve Bank’s 0.4% forecast.

Reporting by Paul McBeth. Image from Robb Miller on Unsplash.