The New Zealand Dollar (NZD) found some support early Monday, pushing NZD/USD higher to 0.5935, up 0.20% on the day. The move comes as traders brace for a busy week of central bank updates, with both the Federal Reserve (Fed) and the Reserve Bank of New Zealand (RBNZ) in focus.
Fed Rate Cut Bets Keep USD Under Pressure
The US Dollar (USD) continues to struggle as expectations for a September Fed rate cut remain intact. According to the CME FedWatch Tool, markets are pricing in an 84% chance of a quarter-point cut at the Fed’s September 16–17 meeting, slightly down from last week’s 98% odds.
US economic data has painted a mixed picture. July’s Retail Sales came in strong, but rising goods prices and a softening labor market signal that consumer spending may slow in Q3. Meanwhile, the University of Michigan survey showed a rise in consumer inflation expectations, reducing the odds of a larger (50bps) rate cut. Traders will now turn to the Jackson Hole Symposium later this week, with Fed Chair Jerome Powell’s speech expected to provide key clues on the rate path.
RBNZ Expected to Cut OCR to 3.0%
In New Zealand, the RBNZ is widely expected to cut the Official Cash Rate (OCR) to 3.0% from 3.25% at its Wednesday meeting. This would bring the total easing cycle to 250 basis points since it began. Markets also see the possibility of another cut to 2.75% early next year, depending on the bank’s updated rate outlook.
Monday’s data release from Business NZ showed that the Performance of Services Index (PSI) improved to 48.9 in July from 47.6 in June, offering the Kiwi some relief. However, any dovish tone from the RBNZ could limit NZD/USD’s upside momentum.
Short-Term Outlook for NZD/USD
The pair’s near-term direction will likely be shaped by:
- The RBNZ decision and forward guidance.
- US FOMC Minutes and Powell’s Jackson Hole speech.
- Shifts in Fed rate cut expectations.
If the Fed sticks to its dovish stance, the USD may remain under pressure, allowing NZD/USD to extend gains. However, a cautious RBNZ could cap the upside and pull the Kiwi lower again.
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