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NZD/USD drops towards 0.6100 as investors turn cautious ahead of upcoming RBNZ decision

  • NZD/USD weakens as traders remain cautious ahead of the RBNZ interest rate decision on Wednesday.
  • NZIER shadow board members recommend that the RBNZ keep the policy rate at 5.50%.
  • Falling Treasury yields put pressure on the US dollar.

NZD/USD continues to lose ground for the second consecutive day, trading around 0.6120 during the early European hours on Tuesday. This drop could be attributed to traders’ caution ahead of the Reserve Bank of New Zealand (RBNZ) interest rate decision on Wednesday.

The Reserve Bank of New Zealand is expected to hold the policy rate (OCR) at 5.50% at its July meeting on Wednesday, despite indications of a slowing economy in New Zealand. Traders will likely keep a close eye on the Monetary Policy Report for further information.

Members of the New Zealand Institute of Economic Research (NZIER) shadow board recommend that the central bank keep the OCR unchanged at the next monetary policy meeting. The current weaker growth, loose labour market and continued decline in annual CPI inflation indicate that previous interest rate increases are successfully reducing inflationary pressures in the New Zealand economy.

As for the USD, Treasury yields are facing challenges due to growing speculation that the Federal Reserve (Fed) could cut interest rates in September, which could limit the upside of the US Dollar. The CME’s FedWatch tool shows that rate markets price in a 76.2% probability of a rate cut in September, up from 65.5% just a week ago.

Federal Reserve Chairman Jerome Powell is expected to deliver his “Semi-Annual Monetary Policy Report” to the U.S. Congress on Tuesday. Powell is expected to provide an overview of the economy and monetary policy, with his prepared remarks being released ahead of his appearance on Capitol Hill.

Economic indicator

Interest rate decision

RBNZ Interest Rate Decision is announced by the Reserve Bank of New Zealand.This rate affects a range of interest rates set by commercial banks, building societies and other institutions towards their own savers and borrowers. It also tends to affect the price of financial assets such as bonds, shares and exchange rates, which affect consumer and business demand in a variety of ways.

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Wed Jul 10, 2024 02:00





Reserve Bank of New Zealand

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing its interest rate decision and the economic assessments that influenced its decision. The central bank provides clues about the economic outlook and future policy path, which are of great relevance to the valuation of the NZD. Positive economic developments and optimistic outlooks could lead the RBNZ to tighten policy by raising interest rates, which tend to be bullish on the NZD. Policy announcements are usually followed by Governor Adrian Orr’s press conference.

Source: Fx Street

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