Forex
New Zealand Dollar Slumps as Fed Hike Expectations Rise
The New Zealand Dollar (NZD) plummeted by 0.35% against the US Dollar (USD), trading marginally below 0.5900 during Tuesday's European session. This decline comes as investors become increasingly confident that the Federal Reserve will raise interest rates at its upcoming policy meeting. As a result, the US Dollar outperformed its peers, with the US Dollar Index (DXY) rising by 0.2% to near 99.60.
The data shows that the US Dollar was the strongest against the New Zealand Dollar among major currencies. Analysts at Brown Brothers Harriman note that the USD has 'recovered most of yesterday's pullback' due to firm Fed expectations, with futures pricing in a 67% chance of a 25bps hike on September 16. This elevated pricing is likely to persist into the September meeting, with the August CPI data on September 11 being a decisive test.
Investors will pay close attention to the US ISM Manufacturing PMI data for August and the US JOLTS Job Openings data for July, which are expected to be published at 14:00 GMT. Analysts see the headline reading of 55.2 consistent with resilient manufacturing activity, while the Prices Paid index is seen falling to a six-month low at 70.8, signaling diminishing upside inflation risk.
On the New Zealand Dollar front, investors await the Reserve Bank of New Zealand's (RBNZ) monetary policy decision on Wednesday. Analysts expect the RBNZ to deliver a 25bp rate increase 'to 2.75%', with markets fully pricing in the move. The impact on the NZD will be highly dependent on whether the statement still includes firmly hawkish guidance and updated rate/economic projections.
The data shows that the US Dollar was the strongest against the New Zealand Dollar among major currencies. Analysts at Brown Brothers Harriman note that the USD has 'recovered most of yesterday's pullback' due to firm Fed expectations, with futures pricing in a 67% chance of a 25bps hike on September 16. This elevated pricing is likely to persist into the September meeting, with the August CPI data on September 11 being a decisive test.
Investors will pay close attention to the US ISM Manufacturing PMI data for August and the US JOLTS Job Openings data for July, which are expected to be published at 14:00 GMT. Analysts see the headline reading of 55.2 consistent with resilient manufacturing activity, while the Prices Paid index is seen falling to a six-month low at 70.8, signaling diminishing upside inflation risk.
On the New Zealand Dollar front, investors await the Reserve Bank of New Zealand's (RBNZ) monetary policy decision on Wednesday. Analysts expect the RBNZ to deliver a 25bp rate increase 'to 2.75%', with markets fully pricing in the move. The impact on the NZD will be highly dependent on whether the statement still includes firmly hawkish guidance and updated rate/economic projections.