The NZD/USD currency pair surged to fresh six-month highs, trading near 0.6030 during Monday’s Asian session. The New Zealand dollar extended its gains for a second consecutive day, driven by sustained weakness in the US dollar amid mounting concerns over the United States’ escalating debt levels.
Market apprehension is growing as the US fiscal deficit risks expanding further if President Trump’s “One Big Beautiful Bill” passes the Senate. According to the Congressional Budget Office (CBO), the legislation could add $3.8 billion to the deficit by offering tax breaks on tip income and loans for US-made vehicles.
Investors also fear the bill could keep US bond yields elevated for an extended period. Persistently high yields translate into increased borrowing costs for consumers, businesses, and the government, amplifying uncertainty about the future health of the US economy.
Meanwhile, half of the members of New Zealand’s economic advisory group, the Reserve Bank of New Zealand’s (RBNZ) ‘Shadow Board’ under the New Zealand Institute of Economic Research (NZIER), recommend a 25 basis-point cut to the Official Cash Rate (OCR) in Wednesday’s Monetary Policy Statement. One member advocates for a more aggressive 50 basis-point reduction, while others prefer holding rates steady for now.
The RBNZ is widely expected to trim the OCR by 25 basis points, citing persistently low inflation and slowing economic growth. Market consensus forecasts the Reserve Bank of Australia’s rates to drop to between 2.75% and 3.0% by year-end.
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