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- NZD/USD remains lower on Monday amid modest US dollar strength.
- The softer risk tone contributes to the tone displayed surrounding the pair.
- Bets on a Fed rate cut in September capped US dollar gains and provided support.
The NZD/USD pair is starting the new week on a weaker note and falling to multi-day lows during the Asian session, although it is finding some support near the 0.6100 round figure mark. However, any real recovery remains elusive following the modest strength of the US dollar and the cautious mood in the market.
The US Dollar Index (DXY), which tracks the greenback against a basket of currencies, rose to its highest level since May 9 in the wake of the Federal Reserve’s hawkish stance, signaling just one rate cut this year. This, combined with the better-than-expected release of the US PMI on Friday, continues to provide some support to the dollar. Meanwhile, ongoing geopolitical tensions and political uncertainty in Europe are tempering investors’ appetite for riskier assets, which is seen as another factor that benefits the US dollar’s relative safe-haven status and should act as a headwind for the risk-sensitive New Zealand dollar.
Furthermore, there are expectations that the Reserve Bank of New Zealand (RBNZ) will cut interest rates Rates Earlier than expected may contribute to limiting the gains of the NZD/USD pair. In fact, the central bank has predicted that it will wait until the third quarter of 2025 before cutting interest rates amid persistent inflation. However, market participants expect the start of the interest rate cutting cycle early next year in the wake of the recent economic downturn. This, coupled with China’s economic woes, calls for caution before taking positions on any rebound in counter currencies, including the New Zealand Dollar (NZD).
The above background suggests that the path of least resistance to NZD/USD pair It is on the negative side. However, traders may refrain from placing aggressive bets and prefer to wait for the release of important US economic data this week – the final reading of first-quarter GDP and the personal consumption expenditures price index. Meanwhile, speeches from influential FOMC members could drive demand for the US dollar and provide some momentum for the currency pair in the absence of any related market movements. Economic versions from the United States.
