NZD/USD Trades Sideways Near 0.6000 Ahead of RBNZ Interest Rate Decision

In the late Asian session on Monday, the NZD/USD pair maintained a sideways trajectory near the psychological level of 0.6000. The Kiwi asset struggled for direction as investors remained cautious ahead of the Reserve Bank of New Zealand (RBNZ) interest rate decision scheduled for Wednesday.

Market expectations anticipate the RBNZ to keep interest rates unchanged at 5.5%, given the prevailing inflationary pressures significantly surpassing the desired rate of 2%. RBNZ Governor Adrian Orr previously indicated that the central bank is on track to bring inflation back within the target band.

Investors are closely monitoring cues regarding the timing of potential rate cuts by the RBNZ. New Zealand’s weakened economic prospects, marked by a technical recession in the latter half of 2023, may spur expectations of early rate adjustments. Should the economic outlook remain vulnerable, the RBNZ may pivot towards implementing rate cuts.

In the broader market context, uncertainty prevailed as evidenced by some losses in S&P 500 futures during the Tokyo session. Additionally, 10-year US Treasury yields surged to 4.43%, contributing to cautious investor sentiment. The upbeat US Nonfarm Payrolls (NFP) report for March has tempered speculation for the Federal Reserve (Fed) to initiate interest rate reductions starting from the June meeting.

The US Dollar Index (DXY) maintained a rangebound trajectory, trading within Friday’s range around 104.30. Investors are eagerly awaiting the inflation data for March, scheduled for release on Wednesday. This consumer price inflation data will provide insights into the potential timing of interest rate adjustments by the Fed.

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