The NZD/USD pair has retreated after briefly rising to a two-week high of 0.6020-0.6025 during the Asian session, breaking a three-day winning streak. The pair has since dropped below the key 0.6000 psychological level, hitting a fresh daily low in the last hour, following a combination of factors weighing on the New Zealand Dollar.
Global risk sentiment received a boost this week with the announcement of US-China trade talks in Switzerland, while slightly better-than-expected labor market data from New Zealand initially provided some support to the NZD/USD pair. The New Zealand Unemployment Rate held steady at 5.1% in the first quarter of 2025, defying expectations of a modest increase. Additionally, the number of people employed rose by 0.1% following a 0.2% decline in the previous quarter.
However, the positive reaction was short-lived. The small rise in employment, combined with ongoing slow wage growth, raised concerns about further interest rate cuts by the Reserve Bank of New Zealand (RBNZ). Market expectations are that the RBNZ could lower rates to 2.75% by year-end, as confirmed by the central bank‘s recent Financial Stability Report, which highlighted the risks posed by global trade tensions on domestic economic growth.
The US Dollar, meanwhile, saw a modest uptick, adding further downward pressure on the NZD/USD pair. USD bulls, however, are likely to hold off on further moves until the Federal Reserve’s two-day meeting concludes later today. The market will focus on the accompanying policy statement and comments from Fed Chair Jerome Powell, which could provide key insights into the future rate-cut path and influence USD demand, potentially providing fresh momentum for the NZD/USD pair.
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