New Zealand dollar slips as rate cut bets grow amid weak economic signals
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Daily Currency Update
Over the past 24 hours, the New Zealand dollar (NZD) has generally weakened against the U.S. dollar, trading near US$0.590 following a modest rally earlier in the week. Although the NZD/USD briefly climbed to around 0.5955 on July 30, up approximately 0.02%, it has since eased toward multi-month lows near 0.5885. This decline reflects persistent U.S. dollar strength alongside soft manufacturing data from China, which curtailed recovery attempts. The broader backdrop features rising momentum in the U.S. dollar, buoyed by a hawkish Federal Reserve and resilient U.S. economic data, pushing the NZD down 0.2% today and leaving it on track for roughly a 3% decline over July. In contrast, the NZD has shown modest strength against the Australian dollar (AUD) over the past week, rising from approximately 0.9136 AUD a week ago to close near 0.916–0.918 today, marking a gain of about 0.3% over seven days. Looking at the wider six-month period, the NZD has appreciated by around 1.0% to 1.35% against the AUD, climbing from the 0.901–0.914 range into the mid-0.91s territory.Looking ahead, analysts expect the NZD/USD exchange rate to decline from roughly 0.5944 in August to around 0.5871 by September, reflecting a 1.44% decrease over the two-month period. This downward trend is primarily attributed to ongoing U.S. dollar strength, supported by robust economic data and expectations of sustained Federal Reserve interest rates. Conversely, the Reserve Bank of New Zealand (RBNZ) is projected to maintain a dovish stance, with forecasts indicating a potential reduction in the official cash rate (OCR) to 2.67% by year-end, down from the current 3.50%.
Key Movers
Overnight, the U.S. dollar (USD) showed broad strength against major currencies, buoyed by robust economic data and hawkish signals from the Federal Reserve. The dollar index (DXY) rose modestly as investors factored in the likelihood of continued Fed interest rate hikes or a prolonged period of elevated rates. Safe-haven demand also supported the USD amid lingering geopolitical uncertainties and cautious risk sentiment across global markets. This increased demand for the dollar exerted pressure on commodity-linked currencies, such as the Australian and New Zealand dollar, which softened against the greenback. Overall, the USD’s overnight performance reflected a blend of strong domestic fundamentals and prudent investor positioning ahead of key upcoming economic releases. At its most recent meeting on July 30–31, 2025, the Federal Open Market Committee (FOMC) chose to maintain the federal funds target range at 5.25% to 5.50%. This cautious decision comes amid signs of easing inflation and a cooling economy. Chair Jerome Powell emphasised the Fed’s commitment to a data-driven approach, refraining from premature rate cuts despite the softer inflation and economic backdrop. He underscored concerns about structural inflationary pressures and labour market dynamics that could complicate the path to easing. Notably, there was dissent within the committee, with Governors Michelle Bowman and Christopher Waller advocating for an immediate quarter-point rate cut—the first dual dissent since 1993. Powell, however, downplayed this internal disagreement, reaffirming the Fed’s independence from political and fiscal influences. He also highlighted that tariffs have already added approximately 0.3–0.4% to consumer prices, further complicating the inflation outlook.While some market participants anticipate rate cuts beginning in September, Powell’s cautious tone left room for flexibility, underscoring ongoing uncertainty in the future trajectory of U.S. interest rates.
Expected Ranges
- NZD/USD: 0.5800 - 0.6000 ▼
- NZD/EUR: 0.5050 - 0.5250 ▼
- GBP/NZD: 2.2300 - 2.2500 ▲
- NZD/AUD: 1.0800 - 1.1000 ▼
- NZD/CAD: 0.8050 - 0.8250 ▲