Nzdusd Declines Ahead Of Rbnz

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Nzdusd Declines Ahead Of Rbnz

Nzd/Usd Declines To 0.6100 Ahead Of Rbnz Decision

NZD/USD continues to maintain a negative tone for the 2nd day in a row and is trading near the 0.6120 handle on Tuesday. The bearish overtone in the NZD/USD is mainly attributed to the market's cautious mood ahead of the RBNZ rate decision.

If the Reserve Bank of New Zealand announces a rate cut, it will mean more downside for the NZD/USD. On the other hand, maintaining the current rate or hints about future rate hikes will allow the NZD/USD to take a U-turn and turn higher.

Rbnz To Keep Rates At 5.50%

For the most part, the RBNZ will likely keep the OCR (official cash rate) near 5.50% with no change at all. This decision will come despite the fact that New Zealand's economy faces a slowdown. The traders will also look at any cues related to the monetary policy to decide their next course of action.

The NZIER (New Zealand Institute of Economic Research) has already recommended the RBNZ to maintain the OCR at the upcoming meeting. According to them, a weaker labor market, slow growth, and a softer inflation print is a sign that the higher rates have successfully tackled the inflation problem.

Conversely, the US bond yields are under pressure as the US Federal Reserve is also expected to cut rates in September. The confirmation of this action will likely be made at Powell's speech where he is expected to show a dovish stance.

The CME Fedwatch tool shows that there's a 76% chance of a rate cut by the US Federal Reserve. Just a week ago, the odds of this happening were just around 65%.

The US Fed Chair will also deliver a report related to the monetary policy along with detailed commentary on the monetary policy and the overall economy. So, if the RBNZ maintains a hawkish or more cautious approach while the US Federal Reserve turns dovish, it will send the NZD/USD pair higher.

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