- NZD/USD prints a fresh three-week high amid weak US Dollar and uncertainty ahead of RBNZ policy.
- The US Dollar falls on the backfoot due to moderating US labor market conditions.
- Investors expect that the RBNZ will hold its OCR at 5.5%.
The NZD/USD pair refreshes a three-week high near 0.6150 in Monday’s Asian session. The Kiwi pair extends its winning streak for the fifth trading session as a debate over the Federal Reserve (Fed) to begin reducing interest rates from the September meeting has heated up after the United States (US) Nonfarm Payrolls (NFP) report for June pointed to normalization of labor market strength.
According to the CME FedWatch tool, 30-day Federal Funds Futures pricing data shows that the probability of rate cuts in September has improved to 75.8% from 64% recorded a week ago. The data also shows that the Fed will deliver subsequent rate cuts in the November or December meeting.
The data from the NFP report showed that the Unemployment Rate unexpectedly rose to 4.1% from the estimates and the prior release of 4.0%. Average Hourly Earnings, a measure to wage growth momentum, decelerated expectedly on both monthly and an annual basis. Fresh hiring came in higher at 206K from estimates of 190K but lower than May’s reading of 218K.
Growing speculation about Fed rate cuts has weighed heavily on the US Dollar. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades close to three-week low near 104.85. 10-year US Treasury yields edge higher in Monday’s trading hours but are close to weekly low around 4.29%.
This week, the New Zealand Dollar (NZD) will be in the spotlight due to the Reserve Bank of New Zealand’s (RBNZ) monetary policy meeting on Wednesday. The RBNZ is widely anticipated to leave its Official Cash Rate (OCR) unchanged at 5.5%. Therefore, investors will pay close attention to the commentary on the interest rate outlook. Market participants see the RBNZ keeping its key rates steady for the entire year.
Economic Indicator
RBNZ Interest Rate Decision
The Reserve Bank of New Zealand (RBNZ) announces its interest rate decision after its seven scheduled annual policy meetings. If the RBNZ is hawkish and sees inflationary pressures rising, it raises the Official Cash Rate (OCR) to bring inflation down. This is positive for the New Zealand Dollar (NZD) since higher interest rates attract more capital inflows. Likewise, if it reaches the view that inflation is too low it lowers the OCR, which tends to weaken NZD.
Read more.Next release: Wed Jul 10, 2024 02:00
Frequency: Irregular
Consensus: 5.5%
Previous: 5.5%
Source: Reserve Bank of New Zealand
The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by Governor Adrian Orr’s press conference.
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