The market bias for the NZD to USD exchange rate is currently bearish.
Key drivers include:
- The Reserve Bank of New Zealand is expected to cut interest rates in response to a negative output gap, which could weaken the NZD.
- The Federal Reserve is likely to implement rate cuts, contributing to a weaker USD in the near term.
- Economic growth indicators suggest a slowing US economy, which may further support the NZD's potential for recovery.
In the near term, the NZD/USD is expected to trade within a stable range, reflecting recent lows around current levels.
Upside risks include a rebound in global economic conditions that may improve sentiment towards the NZD. A downside risk could arise from deeper-than-expected rate cuts by both central banks, sustaining pressure on the NZD.