NZD/USD price rebounds above 0.5650 as Fed holds rates and RBNZ signals economic concerns
NZD/USD rebounds as Fed pauses rate cuts
The NZD/USD pair recovers to 0.5660, snapping a three-day losing streak in early Thursday trading. The rebound comes as the U.S. dollar pulls back from its weekly high of 108.30, with investors awaiting clarity on U.S. tariff policies.
Meanwhile, the Reserve Bank of New Zealand (RBNZ) has maintained a dovish stance, warning of weak economic productivity and trade.
NZD/USD price movement (Dec 2024 - Jan 2025) Source: TradingView.
Fed keeps rates steady, markets await U.S. GDP data
The U.S. Federal Reserve (Fed) left its benchmark interest rate unchanged at 4.25% - 4.5% during its January policy meeting, aligning with market expectations. Fed Chair Jerome Powell reinforced that rate cuts are unlikely in the near term, stating that the central bank needs further confirmation of sustained inflation progress.
The U.S. GDP data for Q4, set for release later on Thursday, along with weekly jobless claims and pending home sales, will be closely watched. A stronger-than-expected GDP reading could support the US dollar, potentially limiting NZD/USD upside momentum.
RBNZ flags economic headwinds, rate cuts in focus
RBNZ Chief Economist Paul Conway painted a pessimistic economic outlook, citing weak productivity, sluggish investment, and declining trade activity. He noted that inflation expectations are easing, paving the way for further monetary policy easing. Markets anticipate the RBNZ to cut rates by another 50 basis points on February 19, extending its current easing cycle.
Despite the NZD/USD recovery, the dovish RBNZ stance could cap gains in the kiwi dollar. Investors will monitor how US economic data and trade policy shifts impact the pair in the near term.
Previously, we discussed NZD/USD's downward pressure due to Trump’s tariff threats and China’s weak PMI data. The latest recovery highlights ongoing market uncertainty, with the Fed’s rate stance and RBNZ’s policy expectations continuing to drive currency movements.
