As the early Asian session kicks off on Wednesday, the NZD/USD pair is facing selling pressure near 0.5945, down 0.25% on the day. This decline is driven by rising expectations of rate cuts by both the Reserve Bank of New Zealand (RBNZ) and the US Federal Reserve. The Kiwi is also feeling the heat from sluggish Chinese economic activity and a surprise rate cut by the People’s Bank of China earlier this week.
The softer Consumer Price Index (CPI) inflation for New Zealand in the second quarter, along with concerns about China’s economic slowdown, have contributed to the Kiwi’s decline. Meanwhile, the markets expect the Fed to cut rates in the upcoming FOMC meetings in September and December, further weighing on the Greenback and capping the downside for the NZD/USD pair.
Investors will be closely watching the preliminary US S&P Global PMIs for July to confirm the rate outlook. The Manufacturing PMI is expected to improve slightly, while the Services PMI may ease a bit. These data releases will provide more clarity on the economic conditions in the US and their impact on the currency markets.
Analysis and Breakdown:
The NZD/USD pair is currently under pressure due to multiple factors, including expectations of rate cuts by both the RBNZ and the Fed. The Kiwi’s decline is also influenced by concerns about Chinese economic activity and a surprise rate cut by the PBoC. Investors are closely monitoring economic data releases to gauge the health of the global economy and its impact on currency valuations. It is essential for traders and investors to stay informed about these developments to make informed decisions about their investments and financial strategies.