The NZD/USD pair is holding near the 0.5890 mark in early European trading on Tuesday, maintaining stability despite a softer US Dollar (USD). Profit-taking has tempered the pair’s recent gains, although its upside remains limited due to growing expectations that the Reserve Bank of New Zealand (RBNZ) will implement a significant interest rate cut next week.
Traders are also closely monitoring the upcoming Loan Prime Rate (LPR) decision from China, a major trading partner of New Zealand. Market participants anticipate potential stimulus measures aimed at boosting economic growth, particularly after China’s recent 10 trillion Yuan debt package, which failed to deliver direct economic stimulus, raising concerns about the pace of recovery.
On the other hand, the US Dollar may strengthen following comments from Federal Reserve Chair Jerome Powell, who downplayed the likelihood of immediate rate cuts. Powell emphasized the resilience of the US economy, a strong labor market, and ongoing inflationary pressures, stating, “The economy is not sending any signals that we need to be in a hurry to lower rates.” Investors are now awaiting further guidance from Fed officials later this week on future US interest rate movements.
In addition, traders are factoring in potential policy changes under a new Trump administration, which could prioritize tax cuts and higher tariffs. These measures are expected to drive inflation, possibly slowing the pace of Fed rate cuts and offering support to the USD. Market participants are also eyeing the release of October US Building Permits and Housing Starts data, set for Tuesday, which could provide further insight into the US economy’s health.
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