NZD/USD clings to gains near 0.5930 amid positive risk tone; lacks follow-trough

NZD/USD attracts some buyers as the upbeat market mood benefits the risk-sensitive Kiwi.
A modest USD uptick caps the currency pair amid bets for another RBNZ rate cut this week.
The Jackson Hole Symposium will also be looked for Fed rate cut cues and a fresh impetus.

Haresh Menghani FXStreet

The NZD/USD pair gains some positive traction at the start of a new week and holds comfortably above the 0.5900 mark during the Asian session, though it lacks bullish conviction. The upbeat market mood is seen acting as a tailwind for the risk-sensitive Kiwi, though a modest US Dollar (USD) uptick acts as a headwind for the currency pair as traders seem reluctant ahead of this week's key central bank events.

The high-stakes meeting between US President Donald Trump and Russian leader Vladimir Putin in Alaska yielded no clear breakthrough. Investors, however, remain hopeful that the start of a dialogue has increased the chances of ending the prolonged war in Ukraine. This, in turn, remains supportive of the upbeat market mood, which, in turn, is seen as a key factor benefiting the New Zealand Dollar (NZD).

The upside for the NZD/USD pair, however, remains capped in the wake of the emergence of some US Dollar (USD) buying. Apart from this, expectations that the Reserve Bank of New Zealand (RBNZ) will lower interest rates at its policy meeting this Wednesday amid weak labour market data, subdued inflation expectations, and slowing wage growth hold back the NZD bulls from placing aggressive bets.

Furthermore, traders might opt to wait for more cues about the Federal Reserve's (Fed) rate cut path before positioning for the next leg of a directional move for the NZD/USD pair. Hence, the focus will remain glued to comments from Fed Chair Jerome Powell at the upcoming Jackson Hole Symposium, which will influence the USD price dynamics and provide some meaningful impetus to the currency pair.

Economic Indicator

RBNZ Interest Rate Decision

The Reserve Bank of New Zealand (RBNZ) announces its interest rate decision after each of 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.

Why it matters to traders?

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 interim Governor Christian Hawkesby's press conference.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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