USD/NZD Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and near recent lows, with limited drivers influencing movement.
Key drivers:
• The Federal Reserve is expected to ease policy with potential rate cuts, which usually weakens the US dollar against other currencies like the NZD.
• Trade tensions, particularly U.S. tariffs impacting New Zealand exports, are creating uncertainty for the NZD, which may hinder its strength.
• The Reserve Bank of New Zealand's recent interest rate cuts are in contrast to the Fed's easing stance, which adds pressure on the NZD.
Range: USD/NZD is likely to drift within the recent 3-month range as both currencies face headwinds and lack positive momentum.
What could change it:
• Upside risk: A significant improvement in global risk appetite could lead the NZD to strengthen significantly against the USD.
• Downside risk: Escalation in U.S. trade tensions could further weaken the NZD as markets react negatively to potential impacts on trade revenues.
