USD/NZD Outlook: Bearish, as the rate is below its recent average and near recent lows, weighed down by specific concerns about the U.S. economy.
Key drivers:
- Rate gap: The Federal Reserve's pause on rate cuts contrasts with the Reserve Bank of New Zealand's potential for interest rate hikes due to rising inflation.
- Risk/commodities: With oil prices declining, market caution is influencing the New Zealand dollar, which typically performs better in a risk-on environment.
- One macro factor: Increased business confidence in New Zealand may support the kiwi, as recent data showed a significant jump in economic optimism.
Range: The USD/NZD is likely to drift within its recent volatile range, staying pressured below recent average levels.
What could change it:
- Upside risk: A surprising improvement in U.S. economic data, such as a strong PMI release, could boost USD demand.
- Downside risk: Continued geopolitical tensions or negative developments in U.S. economic indicators could further weaken the USD against the NZD.