The NZD/USD pair continues its downward trajectory, currently trading around 0.5930 during Tuesday’s European session. This decline is driven by growing tensions in the Middle East and fears of a US economic slowdown, impacting risk-sensitive currencies like the New Zealand Dollar (NZD).
Market Drivers:
- Risk-Off Sentiment: Escalating tensions in the Middle East and concerns about a potential US recession have contributed to a risk-off mood, negatively impacting the NZD.
- Fed Rate Cut Expectations: Increased expectations of a 50-basis point rate cut by the Federal Reserve in September are weighing on the US Dollar, potentially limiting further downside for the NZD/USD pair.
- RBNZ Rate Cut Speculations: Anticipation of an early rate cut by the Reserve Bank of New Zealand (RBNZ) is putting pressure on the Kiwi Dollar. The RBNZ’s next policy meeting is scheduled for August 14, with markets partially pricing in a rate cut.
Upcoming Data:
Traders are eagerly awaiting the release of China’s July Consumer Price Index (CPI) on Friday. A weaker-than-expected reading or signs of an economic slowdown in China could further impact the New Zealand Dollar due to the strong trade relationship between the two countries.
Overall Outlook:
The NZD/USD pair faces challenges due to the prevailing risk-off sentiment and potential rate cuts by both the Fed and the RBNZ. However, a weaker US Dollar and the upcoming Chinese CPI data could provide some support for the Kiwi.