USD/NZD Outlook:
Slightly weaker, but likely to move sideways, as the exchange rate is below its recent average and trading near recent lows.
Key drivers:
• Rate gap: The Federal Reserve has kept interest rates steady amid economic concerns, while the Reserve Bank of New Zealand is expected to cut rates, making the NZD less attractive.
• Risk/commodities: The decline in market risk appetite is affecting the NZD, as investors are wary of economic stability.
• One macro factor: High dairy prices are supporting the New Zealand dollar, helping to offset some pressures from potential interest rate cuts.
Range:
Expect the USD/NZD pair to drift within the recent 3-month range, with potential stability around current levels.
What could change it:
• Upside risk: A stronger-than-expected US non-farm payroll report could boost the USD.
• Downside risk: Continued signs of economic slowdown in the US may further pressure the USD.