NZD/USD Hits Three-Week High Near 0.6150 As New Zealand Central Bank Policy Countdown Begins

NZD/USD hit a three-week high near 0.6150 in Asian trading on Monday. NZD/USD extended its winning streak for the fifth straight session as debate heats up about the Federal Reserve (FED) cutting interest rates starting from the September meeting after the June U.S. non-farm payrolls (NFP) report pointed to normalization of labor market forces.

According to the CME FedWatch tool, 30-day federal funds futures pricing data showed that the probability of a rate cut in September increased to 75.8% from 64% a week ago. The data also showed that the Fed will make a follow-up rate cut at its November or December meeting.

The non-farm report data showed that the unemployment rate unexpectedly rose to 4.1% from the forecast and the previous value of 4.0%. Average hourly earnings, which measures the momentum of wage growth, decelerated as expected on both a monthly and annual basis. New hiring was 206,000, higher than the expected 190,000 but lower than the 218,000 in May.

The growing speculation about the Fed’s rate cut has dealt a heavy blow to the US dollar. The U.S. Dollar Index (DXY), which tracks the value of the U.S. dollar against six major currencies, is trading near a three-week low of 104.85. The 10-year U.S. Treasury yield moved higher during Monday’s trading session but is close to a one-week low of 4.29%.

The New Zealand dollar (NZD) will be in the spotlight this week as the Reserve Bank of New Zealand (RBNZ) will hold its monetary policy meeting on Wednesday. The RBNZ is widely expected to keep the official cash rate (OCR) unchanged at 5.5%. Therefore, investors will be closely watching comments regarding the interest rate outlook. Market participants believe that the RBNZ will keep the key interest rate stable throughout the year.

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