Australian and New Zealand dollar under pressure: Skepticism about China's stimulus grows

The currency markets are currently experiencing a tension between growing skepticism towards China's incentives and the expectation of moderate interest rate cuts in the U.S. The Australian and New Zealand dollars are recording significant losses, while the U.S. dollar is trading near its two-month high. The New Zealand currency came under additional pressure due to recent inflation data indicating a cooling trend, making further expansionary measures by the central bank appear possible. The Australian dollar temporarily fell by 0.51% to 0.6669 USD, the lowest level since September 12, before slightly recovering to 0.6678 USD. Similarly, the New Zealand dollar dropped by up to 0.69% to 0.6041 USD, a level last reached on August 19. Ultimately, it traded 0.53% weaker at 0.6051 USD. The loss of confidence in Beijing's measures is evident: Chinese stocks took a downturn after hopes for government financial support were dashed. On Saturday, the Chinese Ministry of Finance announced plans to increase debt but refrained from providing concrete details. In New Zealand, the market is speculating about a possible 75 basis point rate cut by the Reserve Bank of New Zealand (RBNZ). Statistics New Zealand reported that annual inflation fell to 2.2% in the third quarter, bringing the RBNZ's target range of 1% to 3% within reach for the first time since March 2021. In the U.S., the dollar remains strong, supported by data indicating a robust economy and higher inflation. The dollar index shows stability at 103.25. The market expects a 94% chance of a 25 basis point rate cut at the next Federal Reserve meeting on November 7. The euro is slightly down at 1.08875 USD, briefly reaching its weakest level since August 8. The European Central Bank is soon facing another interest rate decision, with a quarter-point reduction generally anticipated.