The NZD/USD pair weakens to around 0.5665 as the US Dollar gains strength. The market anticipates the Federal Reserve to maintain its benchmark rate, with investors closely watching Jerome Powell's press conference for future policy hints. Meanwhile, the Reserve Bank of New Zealand's (RBNZ) dovish stance suggests further rate cuts, potentially impacting the New Zealand Dollar.
NZD/USD softens to around 0.5665 in Wednesday’s early Asian session. The Fed is expected to hold its benchmark rate steady on Wednesday.
’s Conway said rate will tend towards neutral in the absence of future shocks to the system as pandemic-related disruptions fade. The NZD/USD pair extends the decline to near 0.5665 during the early Asian session on Wednesday, pressured by the renewed US Dollar demand. The USFederal Reserve interest rate decision will take center stage later on Wednesday. Market pricing is pointing to a near 100% certainty that the Fed will keep the policy rate in a target range of 4.25%-4.
Chief Economist Paul Conway said that easing domestic pricing intentions and a drop in inflation expectations will help open the way for some further easing of the OCR, as signalled in November. The dovish bets of the Reserve Bank of New Zealand could undermine the New Zealand Dollar . Swaps markets are now pricing innearly90% possibility of another 50 basis points reduction on February 19, adding to the two delivered earlier in the cycle.
impact the New Zealand Dollar? The Reserve Bank of New Zealand aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
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