USD/NZD Outlook: Bearish, as the rate is below its recent average and near recent lows, pressured by multiple factors.
Key drivers:
- Rate gap: The Federal Reserve is expected to implement more rate cuts, while the Reserve Bank of New Zealand is considering tightening, widening the interest rate differential in favor of the NZD.
- Risk/commodities: Ongoing geopolitical tensions, particularly U.S. military actions, have weakened the USD, making it less attractive for investors.
- One macro factor: New Zealand's annual consumer inflation has surged, prompting expectations of a potential interest rate hike by the Reserve Bank of New Zealand.
Range: The USD/NZD could drift lower as it remains within the recent 3-month range.
What could change it:
- Upside risk: A sudden improvement in U.S. economic data could strengthen the USD.
- Downside risk: Continued geopolitical instability or additional Fed rate cuts could weigh further on the USD.