- The NZD/USD fell to about 0.5825 during early Asian trading on Thursday.
- Minutes from the Fed indicated that inflation is viewed as a larger concern among officials.
- The RBNZ raised its key cash rate by 25 basis points on Wednesday.
In the early hours of Thursday, the NZD/USD pair dipped near 0.5815. The New Zealand Dollar (NZD) is under pressure against the US Dollar (USD) after the Reserve Bank of New Zealand (RBNZ) maintained a cautious stance and potentially hinted at future moves. Traders are now keenly waiting for the preliminary reading of the US S&P Global Purchasing Managers Index (PMI) due later in August.
Minutes from the Federal Reserve’s recent meeting, held on July 29-30, revealed that nearly all attendees believed it was suitable to keep the benchmark interest rate between 4.25% and 4.50%. Officials pointed out that the impact of increased tariffs on inflation would take some time to clarify.
Moreover, most Federal Reserve officials expressed that inflation risks overshadowed concerns regarding the labor market last month. Investors are now looking ahead to the Fed’s annual Jackson Hole Symposium on Friday. They are curious to see whether Fed Chairman Jerome Powell will lean against market expectations for interest rate cuts next month.
If Fed officials deliver dovish comments, it could weaken the US dollar and provide a boost for the NZD/USD pair. According to the CME FedWatch tool, there is currently an 83% likelihood of a rate cut next month, with a 54 basis points pricing expectation.
As expected, the RBNZ lowered its official cash rate (OCR) to 3.0% in its meeting on Wednesday. They noted that the economy has shown signs of stagnation recently, with households and businesses becoming more wary due to rising costs, a sluggish labor market, and global uncertainties.
The Monetary Policy Committee (MPC) indicated that further reductions in the OCR may be possible. RBNZ Governor Christian Hawksby mentioned that upcoming data regarding New Zealand’s economic recovery will influence the RBNZ’s next actions.
