New Zealand dollar dips amid global growth concerns and firm US dollar
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Daily Currency Update
Yesterday, the New Zealand dollar (NZD) posted a modest decline against the US dollar (USD), ending the session near US$0.5900, down approximately 0.36% from the previous day’s close. The Kiwi came under pressure amid a generally cautious market environment, with investor sentiment leaning risk-averse due to persistent concerns about slowing global growth and uncertainty surrounding the future direction of monetary policy.With no significant domestic data releases to provide support, the NZD largely took its cues from offshore developments, particularly movements in the US dollar, which remained firm as traders continued to favour it as a safe-haven currency. Although there is growing speculation that the Federal Reserve may consider easing interest rates in the coming months due to signs of cooling U.S. economic activity, the dollar remained resilient, bolstered by its status as a defensive asset.
Meanwhile, commodity markets offered little relief for the New Zealand dollar, with dairy prices, New Zealand’s top export, remaining flat to slightly weaker, adding to the downward pressure. The NZD/USD pair traded within a tight range for most of the session, reflecting a market in wait-and-see mode ahead of key data later in the week, including U.S. inflation figures and any forward guidance from central banks.
Despite the limited move, the Kiwi’s performance highlighted its ongoing vulnerability to shifts in global sentiment, commodity market trends and evolving expectations around interest rate policy.
Key Movers
Overnight, the U.S. Dollar Index (DXY), which measures the dollar's strength against a basket of six major currencies, experienced a modest rebound after a period of decline. The index rose by approximately 0.1%, closing at around 97.88, recovering slightly from a four-week low reached earlier in the session.This uptick reflected a mixed market reaction to comments made by Federal Reserve Chair Jerome Powell, who delivered a somewhat dovish tone during his recent speeches. While Powell indicated that the Fed might begin cutting interest rates as early as September, in response to slowing economic growth and easing inflation pressures, he also acknowledged that inflation remains a concern, tempering market enthusiasm.
The result was a complex dynamic in which investors increased their bets on a rate cut, with the probability of a 25-basis-point reduction in the Fed funds rate rising to around 86%, up from about 70% before Powell’s remarks. This shift supported some dollar strength overnight as traders adjusted their expectations on monetary policy. Meanwhile, the dollar’s recovery was further helped by a slight decline in the euro, which dropped by 0.18% to 1.1699, retreating from its own recent four-week high.
Despite this short-term rebound, the U.S. Dollar Index remains significantly weaker over the course of 2025, down more than 9.5% year-to-date, reflecting broader concerns about a slowing U.S. economy, geopolitical uncertainties and fiscal challenges facing the country.
Looking ahead, investors are closely watching upcoming U.S. economic data releases, particularly inflation figures and employment reports, which will be critical in determining the Fed’s next policy steps and influencing the dollar’s trajectory in the near term. The market remains cautious, balancing hopes of rate cuts with the ongoing risks posed by inflation and global economic conditions.
Expected Ranges
- NZD/USD: 0.5700 - 0.5900 ▼
- NZD/EUR: 0.4900 - 0.5100 ▼
- GBP/NZD: 2.3100 - 2.3300 ▲
- NZD/AUD: 1.0900 - 1.1100 ▼
- NZD/CAD: 0.7950 - 0.8150 ▼