The NZD/USD pair is currently experiencing limited momentum as it fluctuates between slight gains and losses. The exchange rate hovers around the 0.6235-0.6240 level, close to the monthly high achieved earlier. The US dollar is facing pressure, struggling to attract buyers as it remains near its lowest point this year, primarily due to expectations of potential interest rate cuts by the Federal Reserve. Recent forecasts suggest a possible reduction of 50 basis points in borrowing costs by the year’s end, with projections indicating a decline to a benchmark rate of 3.4% by 2025, and further down to 2.9% by 2026.
Simultaneously, a positive sentiment in global equity markets is reducing the demand for the USD, which has historically served as a safe-haven asset, and is instead providing a lift to risk-sensitive currencies like the New Zealand dollar. However, concerns over a slowing economy in China continue to pose challenges for antipodean currencies. Despite these challenges, expectations of additional economic stimulus from China could help mitigate significant declines in the NZD/USD.
On Thursday, China’s National Development and Reform Commission reiterated a commitment to rolling out effective measures aimed at bolstering economic performance. While the announcement indicated confidence in achieving developmental goals for the year, it did not fully reassure investors, suggesting caution may be warranted before assuming continued upward momentum in the NZD/USD.
Looking ahead, there doesn’t appear to be any major economic data releases from the US set for Friday that could sway market movements significantly. However, remarks anticipated from the Philadelphia Fed President may influence the dynamics of the USD. Overall, the prevailing risk sentiment is likely to present short-term trading opportunities for the NZD/USD pair, which seems poised to register notable weekly gains, breaking a streak of three consecutive weeks of declines.
