NZD/USD gains traction to around 0.5860 in Monday’s Asian session, up 0.55% on the day.
RBNZ is likely to reduce the OCR by 50 bps on Wednesday, bringing the rate to 4.25%.
The cautious stance from the Fed might support the USD.
The NZD/USD pair gathers strength to near 0.5860 on Monday during the Asian trading hours, bolstered by the softer US Dollar (USD). All eyes will be on the Reserve Bank of New Zealand (RBNZ) interest rate decision on Wednesday.
Data released by Statistics New Zealand on Monday showed that the country’s Retail Sales dropped by 0.1% QoQ in the third quarter (Q3), compared to the previous reading of a 1.2% fall. Retail sales fell for the second consecutive quarter as high interest rates dampened consumer sentiment, adding to signs that the economy was in recession in the middle of the year.
Furthermore, investors expect aggressive interest rate cuts from the RBNZ, which might exert some selling pressure on the Kiwi. The swaps market is pricing in a 50 basis points (bps) cut on Wednesday, with some seeing a small chance of a 75 bps reduction.
Meanwhile, the US Dollar Index (DXY), which measures the USD against a basket of currencies, currently trades near 106.85, down 0.62% on the day. The weaker Greenback acts as a tailwind for the NZD/USD pair.
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