NZD/USD holds comfortably above 0.6000, multi-week high amid softer USD/risk-on mood

A combination of supporting factors pushes NZD/USD higher for the fourth straight day.
Diminishing odds for a rate cut by RBNZ, stronger Chinese inflation data boosts the Kiwi.
Dovish Fed expectations and the upbeat mood weigh on the USD and remain supportive.

Haresh Menghani FXStreet

The NZD/USD pair builds on this week's solid recovery from the 0.5850 area, or its lowest level since early November 2023 and gains positive traction for the fourth successive day on Friday. Spot prices cling to intraday gains during the early European session and currently trade around the 0.6025-0.6030 region, just below a three-week high.

The New Zealand Dollar (NZD) continues to be underpinned by Wednesday's better-than-expected employment details, which lowered the likelihood of a rate cut by the Reserve Bank of New Zealand (RBNZ). Furthermore, stronger-than-expected Chinese inflation figures provide an additional boost to antipodean currencies, including the Kiwi, which, along with a modest US Dollar (USD) downtick, continues to push the NZD/USD pair higher.

Despite Thursday's upbeat US labor market report, investors are still pricing in the possibility of a 50 basis points (bps) interest rate cut by the Federal Reserve (Fed) in September. This, in turn, triggers a fresh leg down in the US Treasury bond yields and drags the USD away from the weekly peak touched on Thursday. Furthermore, a positive risk tone undermines the safe-haven buck and contributes to driving flows towards the risk-sensitive Kiwi.

Meanwhile, the NZD/USD pair's positive move could also be attributed to some technical buying above the 0.6000 psychological mark. Nevertheless, spot prices remain on track to register strong gains for the second straight week as the focus now shifts to the crucial RBNZ rate decision and the US consumer inflation figures, both due on Wednesday. The key central bank event risk and the US macro data should provide a fresh directional impetus to spot prices.

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.

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 Governor Adrian Orr’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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