Kiwi dollar extends gains toward 0.5950 amid heightened fed rate cut expectations

Daily Currency Update

The NZD/USD pair extended its upward momentum early Tuesday, climbing toward the 0.5950 level during the opening hours of the Asian trading session. The New Zealand dollar (NZD) is gaining ground against the broadly weaker US dollar (USD), as markets increasingly anticipate a potential aggressive rate cut — possibly a 50-basis-point "jumbo" cut — by the Federal Reserve (Fed) at its upcoming policy meeting. This shift in sentiment comes amid growing evidence of cooling inflation and slowing economic activity in the United States, which has intensified speculation that the Fed may pivot sooner and more decisively toward monetary easing. As a result, US Treasury yields have retreated, diminishing demand for the greenback and supporting a rebound in risk-sensitive currencies like the Kiwi. In addition to Fed-related developments, attention now turns to the upcoming release of the US Producer Price Index (PPI) data for August, scheduled for release on Wednesday. This key inflation metric will offer fresh insight into upstream price pressures and could play a pivotal role in shaping market expectations around the Fed’s next move. A softer-than-expected print may further bolster rate-cut bets and weigh on the USD, while a surprise to the upside could inject volatility into the NZD/USD pair. Meanwhile, the New Zealand dollar may also be underpinned by relatively resilient domestic economic data and a cautiously hawkish stance from the Reserve Bank of New Zealand (RBNZ), which has signaled that interest rates may need to remain elevated for longer to curb persistent inflationary pressures. From a technical standpoint, the NZD/USD pair appears to have cleared a key near-term resistance level, opening the door for a potential test of the 0.5980–0.6000 zone if bullish momentum persists. On the downside, immediate support lies near 0.5900, with further losses likely to be contained unless there is a notable shift in Fed rhetoric or a surprise in US inflation data. Traders will remain focused on upcoming US macroeconomic releases and Fed commentary for further direction, with volatility expected to pick up ahead of next week’s FOMC policy meeting.