Kiwi dollar edges toward US$0.5960 as Fed rate cut bets grow, RBNZ seen easing further
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Daily Currency Update
The NZD/USD pair climbs modestly toward the US$0.5960 level in late European trading on Monday, supported by a broadly weaker U.S. dollar (USD). The Kiwi gains ground as investors increasingly anticipate that the Federal Reserve will begin easing monetary policy at its upcoming meeting on Wednesday. Market participants are positioning for a more dovish stance from the Fed, with expectations rising that interest rate cuts could commence as early as this week.This shift in sentiment has weighed on the U.S. dollar, allowing risk-sensitive currencies like the New Zealand dollar (NZD) to recover some lost ground. Despite the pair's recent gains, the medium-term outlook for the NZD remains clouded by growing expectations of further monetary easing by the Reserve Bank of New Zealand (RBNZ). According to a recent Reuters report, the RBNZ is projected to cut its Official Cash Rate (OCR) twice more before the end of the year.
The central bank has already lowered rates by a total of 125 basis points in 2025, bringing the OCR to 3.00%. This dovish stance reflects ongoing concerns about weak domestic growth and subdued inflation, which could continue to limit the upside potential for the Kiwi, particularly against currencies backed by more resilient economic fundamentals.
Looking ahead, traders will closely monitor developments from both the Federal Reserve and the RBNZ for further clarity on the interest rate outlook, which will likely play a pivotal role in determining the next direction for NZD/USD.
Key Movers
The pound (GBP) strengthened during the North American session on Monday, supported by diverging monetary policy expectations between the Bank of England (BoE) and the U.S. Federal Reserve (Fed). The GBP/USD pair trades around 1.3586 at the time of writing, gaining 0.22% on the day, after rebounding from a session low of 1.3548.Market sentiment is increasingly tilted toward a potential interest rate cut by the Fed during its upcoming policy meeting on Wednesday, the first in nine months. In contrast, the BoE is widely expected to hold rates steady as inflationary pressures in the UK remain elevated. This divergence in policy outlooks is offering support to the pound as traders position ahead of a critical week for both economies. In the UK, a heavy economic calendar will play a crucial role in shaping expectations for the BoE’s next moves.
On Tuesday, investors will assess the latest labour market data, followed by the release of August inflation figures on Wednesday. The BoE’s policy decision will cap off the week on Thursday. Inflation remains a key concern for the UK central bank, with the Consumer Price Index (CPI) hovering close to the 4% mark, well above the BoE’s 2% target. Persistent price pressures may reinforce the case for the BoE to maintain a restrictive policy stance, even as growth risks loom.
The pound’s near-term direction will likely hinge on the outcome of these data releases and central bank announcements, with traders closely watching for any signs of policy divergence that could drive volatility in GBP/USD.
Expected Ranges
- NZD/USD: 0.5850 - 0.6050 ▲
- NZD/EUR: 0.4950 - 0.5150 ▲
- GBP/NZD: 2.2850 - 2.3050 ▼
- NZD/AUD: 1.0950 - 1.1150 ▲
- NZD/CAD: 0.8050 - 0.8250 ▲