NZD/USD Holds Steady Amid Fed Independence Concerns and RBNZ’s Dovish Tone

The NZD/USD pair remains steady near 0.5860 in Wednesday’s early Asian session, as concerns about the Federal Reserve’s (Fed) independence continue to impact the US Dollar (USD). Meanwhile, the dovish stance from the Reserve Bank of New Zealand (RBNZ) may limit the upside potential of the New Zealand Dollar (NZD) in the near term.

On Monday, US President Donald Trump made headlines by firing Fed Governor Lisa Cook, a move that marked the first time in the Federal Reserve’s history a sitting president has removed a central bank governor. The controversy surrounding this decision has raised concerns about the Fed’s independence, with Trump seeking to appoint new governors to align with his preference for lower interest rates. Cook, however, has resisted the move, asserting that she will not resign, citing her authority within the Fed.

These developments have led to growing uncertainty in the US Dollar, with traders now pricing in an 85% probability of a rate cut at the Fed’s September meeting, up from 75% previously. This dovish outlook from the Fed could weigh on the USD, providing some support to the NZD/USD pair.

On the other hand, the dovish stance from the Reserve Bank of New Zealand (RBNZ) is limiting any significant gains for the Kiwi. The RBNZ recently lowered its policy rate by 25 basis points to a three-year low of 3.00% and indicated that further rate cuts are likely in the coming months. RBNZ Governor Christian Hawkesby highlighted that the central bank is data-dependent and will consider additional easing if economic conditions, particularly consumer and business sentiment, remain subdued.

As a result, the NZD/USD pair remains in a holding pattern, awaiting further developments in both the US and New Zealand economic outlooks. Key upcoming data, including the US GDP and the Personal Consumption Expenditures (PCE) Price Index, will provide further clues on the trajectory of US monetary policy, potentially influencing the NZD/USD pair’s direction.

With the US Dollar facing pressure amid Fed concerns and the New Zealand Dollar weighed down by the RBNZ’s cautious approach, the NZD/USD pair is likely to remain range-bound until a more decisive catalyst emerges.

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