The New Zealand Dollar/US Dollar (NZD/USD) pair found support near the 0.6045 level on Tuesday, halting its recent retreat from the highest point seen since October 2024. However, the rebound lacked strong momentum, and the pair is currently trading around 0.6065 to 0.6070, up slightly by just over 0.10% in early European sessions.
US Dollar Remains Weak Amid Rate Cut Expectations
The US dollar continues to struggle to attract significant buying interest. It remains well above its three-year lows, which benefits the NZD/USD exchange rate. Market participants are increasingly pricing in the possibility that the Federal Reserve may restart its rate-cutting cycle as soon as September. This outlook is fueled by signs of slowing inflation and a slowing US economy.
Additional pressures such as US fiscal concerns and uncertainties around trade policy keep dollar bulls cautious and defensive.
New Zealand Dollar Supported by Domestic Inflation Data
Meanwhile, the New Zealand dollar gained support from stronger-than-expected domestic data. The country’s food price index accelerated to 4.4% in May, up from 3.8% in April, marking its highest level since December 2023. This data contradicted expectations that the Reserve Bank of New Zealand would only implement one more rate cut, thus giving added support to the NZD/USD pair.
Despite this, traders remain cautious and reluctant to place large directional bets ahead of important central bank announcements.
Focus on Upcoming US Federal Reserve Decision
The US Federal Reserve is scheduled to announce its policy decision after a two-day meeting on Wednesday. Amid uncertainty over US trade policies, it is widely expected that the Fed will hold rates steady. Investors will closely watch the policy statement and the subsequent speech by Fed Chair Jerome Powell for signals on future rate cuts.
These developments are expected to drive movements in the US dollar and influence the NZD/USD exchange rate.
Retail Sales and Geopolitical Risks Add to Market Uncertainty
On Tuesday, traders will also pay close attention to US monthly retail sales data for additional market direction during early North American trading.
Meanwhile, escalating geopolitical tensions in the Middle East have weighed on global risk sentiment. This heightened risk aversion may limit bullish momentum for the risk-sensitive New Zealand dollar, keeping the NZD/USD pair confined within a familiar trading range observed over the past week.
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