NZD/USD has broken its three-day losing streak, with the New Zealand Dollar facing challenges as the 10-year government bond yield fell below 4.85%. The Reserve Bank of New Zealand has raised its forecast for interest rates and delayed any rate cuts, keeping the cash rate at 5.5%. New Zealand Finance Minister Nicola Willis stated that inflation is expected to fall below 3% in Q3, easing to 2% by 2026, with GDP expected to contract in H1 2024.
On the USD front, the US GDP Annualized for Q1 was revised lower to 1.3% and Initial Jobless Claims rose slightly to 219,000. Investors are awaiting the release of the Core PCE Price Index by the Federal Reserve, which could potentially reignite debate over rate cuts in September. The hawkish remarks of Fed officials have helped the US Dollar to hold ground, impacting the NZD/USD pair.
Despite the challenges faced by the New Zealand Dollar, the RBNZ’s decision to maintain restrictive policy for longer to ensure inflation returns to target range has provided some support. With the US economic data showing signs of weakness, there is speculation over potential rate cuts in the future, further impacting the NZD/USD pair. Traders are closely monitoring the Core PCE Price Index release to gauge the potential impact on the currency pair.
The New Zealand Treasury’s outlook on inflation and GDP growth adds to the uncertainty surrounding the NZD/USD pair. With inflation expected to fall and GDP growth projections showing contraction followed by growth, the New Zealand Dollar could face further pressure. The USD’s performance in response to economic data releases will also play a significant role in determining the direction of the currency pair in the coming days.
Overall, the NZD/USD pair is experiencing volatility and facing challenges from both domestic and international economic developments. The RBNZ’s monetary policy decisions, US economic data, and the upcoming Core PCE Price Index release are key factors influencing the currency pair. Traders are advised to closely monitor these developments and adapt their trading strategies accordingly to navigate the fluctuations in the NZD/USD market.
