Investors Remain Cautious Ahead Of RBNZ Decision, NZD/USD Falls Towards 0.6100

NZD/USD fell for the second day in a row, trading around 0.6120 in early European trading on Tuesday. The decline could be attributed to traders being cautious ahead of the Reserve Bank of New Zealand (RBNZ) rate decision on Wednesday.

Despite signs that the New Zealand economy is slowing, the Reserve Bank of New Zealand is expected to keep the official cash rate (OCR) unchanged at 5.50% at its July meeting on Wednesday. Traders are likely to focus on the monetary policy statement for more information.

Members of the New Zealand Institute of Economic Research (NZIER) Shadow Committee recommended that the central bank keep the official cash rate unchanged at its upcoming monetary policy meeting. New Zealand’s current weak economic growth, weak labor market and continued low year-on-year CPI inflation suggest that previous cash rate hikes are successfully reducing inflationary pressures in the New Zealand economy.

On the US dollar side, US Treasury yields are facing challenges amid growing speculation that the Federal Reserve (Fed) may cut interest rates in September, which may limit the dollar’s upside. The Chicago Mercantile Exchange (CME) FedWatch tool shows that interest rate markets are pricing in a 76.2% probability of a September rate cut, up from 65.5% a week ago.

Federal Reserve Chairman Jerome Powell is likely to deliver his “semi-annual monetary policy report” to the U.S. Congress on Tuesday. Powell is likely to give a broad overview of the economy and monetary policy, with his prepared remarks to be released ahead of his appearance on Capitol Hill.

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