The NZD/USD pair has recaptured the 0.5900 level as the Reserve Bank of New Zealand (RBNZ) is expected to pivot to rate cuts following the Federal Reserve’s stance on interest rates. The US Dollar Index (DXY) has moved higher, reaching 106.30, as the strong US economic outlook supports the Fed’s decision to maintain higher interest rates.
Market sentiment has turned positive as tensions in the Middle East ease, with Iran stating they have no immediate plans for retaliation against Israel. This has improved demand for Asian currencies, including the Kiwi asset.
The S&P 500 has opened on a positive note, reflecting improved risk appetite among investors. Federal Reserve policymakers believe that the current restrictive monetary policy framework is appropriate given strong labor demand and higher price pressures.
Atlanta Fed President Raphael Bostic has indicated that conditions for rate cuts won’t be favorable towards the end of the year, as inflation progress towards the 2% target is slower than expected. Bostic emphasized the importance of patience, citing robust labor demand and resilient wage growth.
European currencies are underperforming against the US Dollar, as expectations grow for rate cuts by the Bank of England and the European Central Bank. The RBNZ is expected to reduce interest rates later than the Fed, with traders pricing in a potential rate cut in November. The Reserve Bank of Australia, on the other hand, is not expected to cut rates this year.
Overall, the NZD/USD pair remains steady at 0.5900, with the strong US Dollar limiting further upside potential. Investors will be closely watching central bank decisions and economic data for further direction in the currency markets.
Source: https://www.fxstreet.com/news/nzd-usd-holds-recovery-to-05900-strong-us-dollar-limits-upside-202404221429
