NZD/USD price declines as traders brace for RBNZ expected rate cut
Kiwi dollar weakens as RBNZ prepares for a 50-bps rate cut
The New Zealand dollar (NZD) slipped against the U.S. dollar (USD) on Tuesday, reversing a three-day winning streak as investors prepared for a major rate cut by the Reserve Bank of New Zealand (RBNZ). The NZD/USD pair fell to $0.571, retreating from a two-month-high, as the U.S. dollar strengthened amid rising Treasury yields and hawkish Fed remarks.
The U.S. dollar Index (DXY) climbed to 106.90, benefiting from rising U.S. Treasury yields, with the 2-year yield at 4.27% and the 10-year yield at 4.50%. The uptick in yields followed Federal Reserve Governor Michelle Bowman’s warning about persistent inflation risks, suggesting that rate cuts are not imminent.
Meanwhile, Fed Governor Christopher Waller acknowledged progress in inflation control but signaled that policy decisions will remain data-dependent. Traders also reacted to U.S. retail sales data, which fueled speculation about potential rate cuts later in 2025 despite lingering inflation concerns.
NZD/USD price movement (Dec 2024 - Feb 2025) Source: TradingView.
RBNZ expected to slash interest rates
The RBNZ is widely expected to cut its Official Cash Rate (OCR) by 50 basis points to 3.75% at its policy meeting on Wednesday, marking a shift toward monetary easing amid signs of economic slowdown. Rising unemployment and weakening GDP growth have fueled expectations of a dovish stance, with speculation suggesting two more 25-basis-point cuts in April and May.
Market participants will closely watch RBNZ Governor Adrian Orr’s press conference following the decision. If Orr signals further aggressive rate cuts, the NZD could face additional downward pressure. Conversely, if the RBNZ maintains a cautious stance, the kiwi dollar could find temporary support.
NZD/USD outlook: Key levels to watch
The NZD/USD pair remains under pressure, testing support near 0.57. If selling pressure persists, the next downside targets are 0.567 and 0.563. On the upside, a recovery above 0.575 could push the pair toward 0.58, though momentum remains bearish ahead of the RBNZ announcement.
In our last update, NZD/USD rebounded toward $0.57 as traders anticipated monetary policy shifts. The latest Fed remarks and the expected RBNZ rate cut now set the stage for increased volatility in the currency pair.
