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NZD/USD steadies after RBNZ rate cut, attention turns to Powell at Jackson Hole

  • The New Zealand Dollar steadies around a four-month low, pausing a three-day losing streak after the RBNZ’s rate cut.
  • NZD/USD trades flat near 0.5820, showing muted reaction to broad US Dollar strength.
  • Market attention turns to Powell’s Jackson Hole speech on Friday for monetary policy direction.

The New Zealand Dollar (NZD) is finding its footing against the US Dollar (USD) on Thursday after heavy selling in the wake of the Reserve Bank of New Zealand’s (RBNZ) rate cut a day earlier, which dragged the pair to its lowest level in four months. At the time of writing, NZD/USD is trading flat near 0.5820, stabilizing after a three-day decline.

Meanwhile, the US Dollar extended its advance across major peers, supported by stronger-than-expected S&P Global Purchasing Managers Index (PMI) surveys. The data reinforced confidence in the resilience of the US economy, prompting markets to scale back expectations of aggressive monetary easing by the Federal Reserve (Fed). The upbeat PMI figures overshadowed weaker labor market signals, with US Initial Jobless Claims rising to an eight-week high, reinforcing signs that the labor market is gradually cooling.

The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, climbed to its strongest level since August 11, trading near 98.60. The move was also supported by hawkish comments from Fed officials earlier in the day, which reinforced expectations that the Fed will remain cautious on easing. Yet NZD/USD’s muted reaction suggests that much of the Kiwi’s weakness had already been priced in after the RBNZ’s rate cut.

Fed officials struck a broadly hawkish tone on Wednesday, reinforcing the higher-for-longer policy message. Minneapolis Fed’s Schmid cautioned that inflation remains “closer to 3% than 2%” and stressed he is “not in a hurry” to cut rates, describing current policy as “modestly restrictive and appropriate.” He emphasized the need for clear evidence from the upcoming August and September inflation data before adjusting policy, adding that markets and credit spreads remain in good shape.

Atlanta Fed President Raphael Bostic echoed the cautious stance, reiterating his outlook for just one rate cut this year while warning that the employment trajectory is “potentially troubling.” He added that policy should move consistently, projecting that rates could return closer to neutral only by 2026.

Fed Governor Hammack also leaned hawkish, stating that inflation is still too high, its trend remains unfavorable, and he does not see a case for a September cut based on current data, while underscoring the importance of maintaining modestly restrictive policy.

Attention now turns to Fed Chair Jerome Powell’s keynote speech at the Jackson Hole Symposium on Friday for fresh cues on monetary policy and the September rate decision. Traders have pared back expectations of near-term easing, with the CME FedWatch Tool showing a 71% probability of a 25 basis point cut in September, down from 81% earlier in the day and nearly fully priced just a week ago.

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.

Read more.

Last release: Wed Aug 20, 2025 02:00

Frequency: Irregular

Actual: 3%

Consensus: 3%

Previous: 3.25%

Source: Reserve Bank of New Zealand

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

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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