The NZD/USD pair has risen to nearly 0.6000 during the early European session on Monday, buoyed by a weaker US Dollar (USD). Investors are keeping a close watch on the upcoming US presidential election on Tuesday, which is anticipated to introduce fresh market volatility.
The decline in the USD is attributed to a recent poll suggesting a reduced likelihood of Republican candidate Donald Trump securing victory in the election. Analysts indicate that a Trump win could lead to a strengthening of the USD. Chris Weston, an analyst at Pepperstone, noted, “A Trump presidency with full control of Congress could be most impactful, as one would expect a solid sell-off in Treasuries resulting in a spike higher in the USD.”
Despite this potential scenario, analysts believe that the uncertainty surrounding the election results will not significantly affect the US Federal Reserve’s (Fed) decision-making process at its meeting on Thursday. The Fed is widely expected to implement a quarter-point cut to its benchmark rate, following a half-point reduction in September.
Meanwhile, the upside potential for the New Zealand Dollar (NZD) may be constrained by increasing expectations of a dovish stance from the Reserve Bank of New Zealand (RBNZ). Market forecasts have fully priced in a 50 basis point rate cut for November, with projections suggesting a reduction in the cash rate from 4.75% to 3.82% by the end of the year.
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