NZD/USD Edges Lower Amid Mixed Sentiment

During the Asian session on Tuesday, the NZD/USD pair experienced a slight decline, approaching the 0.5920 level. The New Zealand Dollar (NZD) found some support from an improved risk appetite, contributing to the strength of the NZD/USD pair. This positive shift follows reduced geopolitical tensions in the Middle East, highlighted by a recent statement from an Iranian official indicating no immediate plans for retaliation against Israeli airstrikes.

However, the upside potential for the NZD/USD pair seems limited due to a hawkish sentiment surrounding the Federal Reserve’s (Fed) interest rate outlook for June. According to the CME FedWatch Tool, the probability of interest rates remaining unchanged in the June meeting has increased to 84.4%, signaling a more cautious approach by the Fed.

Furthermore, comments from Federal Reserve officials suggest a more hawkish stance regarding the trajectory of interest rates in June, potentially strengthening the US Dollar (USD). Chicago Fed President Austan Goolsbee remarked that progress on inflation had “stalled,” indicating that the current monetary policy is appropriate. Similarly, Atlanta Fed President Raphael Bostic suggested that the US central bank would likely refrain from cutting interest rates until the end of the year.

Additionally, the China Securities Journal hinted at the possibility of the People’s Bank of China (PBoC) lowering the Medium-term Lending Facility (MLF) rate on May 15 to reduce funding costs. Given the strong trade relationship between China and New Zealand, such a move could impact New Zealand’s market and consequently affect the Kiwi Dollar.

Market participants will closely monitor New Zealand’s monthly Trade Balance NZD data for March on Wednesday, followed by ANZ-Roy Morgan Consumer Confidence on Friday. In the United States (US), attention will be on the S&P Global Purchasing Managers Index (PMI) on Tuesday, with expectations of improvements in both the manufacturing and services sectors for April.

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