NZD/USD sticks to modest gains below mid-0.5900, Fed rate decision, New Zealand GDP eyed

The NZD/USD pair posts modest gains and trades in positive territory for the second consecutive day during the early Asian session on Tuesday. The modest uptick in the Kiwi (NZD) is supported by a weaker US Dollar (USD) as the markets anticipate that the Federal Reserve (Fed) to maintain the interest rate unchanged at its meeting on Wednesday.

In the quiet day of New Zealand's economic docket, the headline surrounding China’s economic woes remains in focus. Any signs of an economic slowdown in China could drag the China-proxy Kiwi lower against the US Dollar and act as a headwind for the NZD/USD pair. Statistics New Zealand will release the nation’s Gross Domestic Product (GDP) for the second quarter on Thursday. The previous growth number came in at -0.1% and 2.2% on quarter and annual basis, respectively.

On the other hand, a Fed pause is widely expected, while keeping one more rate hike on the table. According to the CME Fedwatch tools, the Fed is not expected to surprise the markets, with the probability of keeping rates unchanged at 99%. The press conference by Fed Chairman Jerome Powell could offer hints about future interest rates path Any dovish stance from officials might trigger a decline in the US Dollar (USD).

Moving on, market participants will closely watch the Fed policy meeting on Wednesday at 18:00 GMT with the Fed widely expected to hold interest rates unchanged at 5.5%. The attention will shift to the press conference by Fed Chairman Jerome Powell at 18:30 GMT for some hints about the ‘dot plot’ and inflation expectations. Later this week, the New Zealand Gross Domestic Product (GDP) for the second quarter (Q2) will be due on Thursday. These figures could give a clear direction to the NZD/USD pair.