The NZD/USD pair experienced a sharp reversal from a multi-week high following the surprise 25 bps rate cut by the Reserve Bank of New Zealand (RBNZ). Despite this, the pair managed to hold above the key 0.6000 level as traders await the US consumer inflation figures for further direction.
The RBNZ’s decision to cut rates for the first time in over a year, coupled with expectations of more cuts in the future, weakened the New Zealand Dollar (NZD) across the board. This dovish stance, along with a negative outlook on domestic economic growth, led to a significant drop in the NZD/USD pair.
On the other hand, the US Dollar (USD) is struggling near recent lows amid expectations of further rate cuts by the Federal Reserve (Fed). The softer-than-expected US Producer Price Index (PPI) and a positive risk sentiment in the equity markets have also weighed on the USD, providing some support to the Kiwi.
Traders are now awaiting the US consumer inflation figures to gauge the Fed’s future monetary policy path before making any significant bets on the NZD/USD pair. It is crucial to watch for continued selling pressure to confirm a near-term top in the pair, especially after its recent recovery from the YTD low.
Analysis:
The RBNZ’s surprise rate cut and the dovish outlook have significantly impacted the NZD/USD pair, leading to a sharp decline in the Kiwi. Meanwhile, the USD remains under pressure due to expectations of further rate cuts by the Fed. Traders are advised to stay informed about upcoming economic data releases and central bank decisions to make informed investment decisions.