NZD/USD Falls Despite Weaker USD, Eyes On New Zealand’S Q1 GDP On Thursday

NZD/USD struggled to capitalize on a nice rebound from the previous day’s sub-0.6100 level or a one-week low and attracted some sellers during Wednesday’s Asian session. Spot prices are currently trading around 0.6135, down 0.10% on the day, but lacked follow-through selling amid a weaker tone for the U.S. dollar.

The U.S. Dollar Index (DXY), which tracks the greenback against a basket of currencies, hovered near a one-week low hit the previous day as expectations mounted that the Federal Reserve (FED) would soon cut interest rates. Such expectations were boosted by weak U.S. retail sales data on Tuesday, which showed signs of fatigue among U.S. consumers. This came on the back of weak U.S. consumer and producer prices last week, supporting the prospect of an imminent rate-cutting cycle by the Fed in September.

Apart from this, the bullish tone in global equities also weakened the status of the safe-haven U.S. dollar and could provide support to the risk-sensitive New Zealand dollar. Nonetheless, mixed economic data released by China on Monday highlighted a bumpy recovery in the world’s second-largest economy, weighing on risk currencies including the NZD. In addition to this, comments from Paul Conway, chief economist of the Reserve Bank of New Zealand (RBNZ), also weighed on the NZD/USD pair.

Conway noted that inflation may be firm in the short term, but could fall faster than expected in the medium term. This in turn will keep bullish traders on the sidelines ahead of New Zealand’s first quarter economic growth data, which will be released on Thursday. Meanwhile, with Wednesday being a US banking holiday, there is no relevant economic data in the market and trading volumes are relatively thin, in which case US dollar price dynamics may continue to influence NZD/USD.

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