The NZD/USD currency pair gained slightly on Thursday, trading around 0.5930, buoyed by an improvement in global market sentiment.
- Risk Appetite Rebounds: Lower Oil prices and a dovish Fed meeting outcome boosted investor confidence, supporting commodity currencies like the Kiwi.
- Fed Slows Tightening, Weakens USD: The Fed’s decision to slow quantitative tightening weakened the US Dollar across most pairs.
Long-Term Pressures for NZD/USD
- NZ Economy Struggles: New Zealand’s recent economic data reveals a technical recession, rising unemployment, and falling inflation.
- RBNZ Rate Cut Expectations: This weak economic performance could lead the RBNZ to cut interest rates before the Fed.
- Lower NZ Rates Reduce Capital Inflows: A potential RBNZ rate cut could make the NZD less attractive compared to the USD.
RBNZ Policy Creates Uncertainty
- The RBNZ faces a dilemma between supporting growth with rate cuts and controlling inflation.
- While high inflation suggests holding rates, weak growth argues for cuts.
