NZD/USD Holds Near 0.5850 as Retail Sales Beat Forecasts, Fed Cut Bets Grow

The New Zealand Dollar (NZD) steadied near 0.5850 against the US Dollar (USD) in Monday’s Asian session, following the release of stronger-than-expected Q2 Retail Sales data. Despite the upbeat figures, the Kiwi remains under mild pressure as global markets focus on the Federal Reserve’s September policy decision.

New Zealand Retail Sales Outperform Expectations

According to official data, Retail Sales in New Zealand rose 0.5% quarter-on-quarter in Q2, surpassing market forecasts of a 0.2% gain. Although the pace slowed from Q1’s 0.8% increase, the numbers highlight resilient consumer activity despite economic headwinds.

Retail Sales excluding autos posted an even stronger performance, climbing 0.7%, up from 0.4% in the prior quarter. These figures suggest that domestic demand remains a supportive factor for the Kiwi in the near term.

Last week, however, the Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate (OCR) by 25 basis points to 3%, its lowest in three years. Policymakers signaled the possibility of further easing, citing sluggish growth. Prime Minister Christopher Luxon criticized the central bank, arguing that more aggressive action was necessary to revive the economy.

Fed Rate Cut Bets Continue to Drive USD Sentiment

On the US side, the Dollar weakened late last week after Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium. Powell acknowledged that downside risks to the labor market are rising but emphasized that inflation remains a challenge.

According to the CME FedWatch Tool, markets are now pricing in an 87% probability of a 25 basis point Fed rate cut in September, up from 75% prior to Powell’s remarks.

Upcoming US data releases — particularly Q2 GDP (Annualized) and July’s Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge — will be crucial in shaping expectations ahead of the September FOMC meeting.

NZD/USD Outlook

Immediate Support: 0.5830, with stronger demand expected around 0.5770.
Resistance Levels: 0.5900 followed by 0.5950 (50-day EMA).
Bias: The pair remains vulnerable as long as it trades below 0.5900, though stronger retail figures may provide short-term relief.

With Fed policy in focus and RBNZ maintaining an easing stance, NZD/USD is likely to remain range-bound, awaiting fresh catalysts from US inflation data and Powell’s upcoming policy signals.

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Yasher Rizwan