During Tuesday’s European trading session, the NZD/USD pair slipped closer to the 0.6120 mark. The US Dollar (USD) strengthened against the Kiwi Dollar as market participants exercised caution ahead of the Federal Reserve’s impending interest rate decision scheduled for Wednesday.
The Federal Reserve is widely anticipated to uphold interest rates within the 5.25%-5.50% range as part of its strategy to rein in inflation towards the targeted 2%. Notably, according to the CME FedWatch Tool, the likelihood of a 25-basis-point rate cut in September has dwindled to approximately 49.0%, marking a decrease from 59.5% recorded a week earlier.
Meanwhile, the US Dollar Index (DXY), a measure of the USD’s value against six major currencies, maintains its strength buoyed by hawkish sentiment surrounding the Fed‘s stance on policy tightening. The release of robust US jobs data for May has diminished expectations for two rate cuts by the Fed in 2024.
On the Kiwi front, market participants are keenly awaiting China’s Consumer Price Index (CPI) and Producer Price Index (PPI) reports on Wednesday, seeking insights into the economic landscape of New Zealand’s largest export market.
Despite economic headwinds, the New Zealand Dollar (NZD) continues to find support from the country’s high interest rates. The Reserve Bank of New Zealand (RBNZ) is anticipated to uphold a stable policy stance at least until mid-2025, allowing for comprehensive data assessment amidst economic uncertainties.
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