The New Zealand Dollar (NZD) has managed to hold its ground, with the NZD/USD pair trading around 0.5780 during Asian hours on Tuesday. Market attention is focused on the upcoming US Federal Reserve (Fed) meeting, where traders are anticipating a potential interest rate cut. A quarter-point rate reduction is nearly fully priced in, according to the CME FedWatch tool, with investors closely watching Fed Chair Jerome Powell’s press conference and the Fed’s economic projections for 2025.
Meanwhile, the US Dollar (USD) remains subdued for the third consecutive session, reflecting market caution ahead of the Fed’s decision. The US Dollar Index (DXY), which tracks the USD against six major currencies, is trading around 106.70.
In economic data, the US showed mixed results on Monday, with the preliminary S&P Global Composite Purchasing Managers Index (PMI) rising to 56.6 in December from 54.9 previously. The Services PMI improved to 58.5, while the Manufacturing PMI declined to 48.3, signaling contraction.
In New Zealand, traders are adopting a cautious stance ahead of the release of third-quarter Gross Domestic Product (GDP) data on Thursday. The economy is expected to shrink by 0.4% quarter-on-quarter, potentially marking a return to recession.
China’s retail sales data, a key indicator for New Zealand’s major trading partner, added to the bearish sentiment. Retail sales growth unexpectedly slowed to 3.0% year-on-year in November, missing expectations of 4.6% and significantly lower than the 4.8% increase in October.
Domestically, New Zealand’s Business NZ Performance of Services Index rose to 49.5 in November, up from 46.2 in October, marking the highest reading since February. Additionally, the Food Price Index showed a 1.3% year-on-year increase in November, slightly above October’s 1.2% rise.
As traders brace for the Fed’s rate decision and monitor New Zealand’s economic data, the NZD/USD pair continues to hover near key levels, reflecting broader market uncertainty.
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