NZD/USD depreciates to near 0.6100 due to waning odds of a Fed rate cut in September

• NZD/USD edges lower due to the hawkish sentiment surrounding the Fed.
• CME FedWatch Tool suggests the odds of a Fed rate cut in September have decreased to nearly 49.0%.
• The New Zealand Dollar may limit its downside as RBNZ is expected to maintain tightening policy for longer.

NZD/USD edges lower to near 0.6120 during the European trading session on Tuesday. US Dollar (USD) gains ground against the Kiwi Dollar as investors adopt a cautious stance ahead of the Federal Reserve’s (Fed) interest rate decision scheduled on Wednesday.

The Federal Reserve is anticipated to keep interest rates steady in the range of 5.25%-5.50% as it aims to curb inflation toward its 2% target. According to the CME FedWatch Tool, the likelihood of a Fed rate cut in September by at least 25 basis points has decreased to nearly 49.0%, down from 59.5% a week earlier.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, maintains its position due to the emergence of the hawkish sentiment surrounding the Fed regarding its policy tightening. The robust US jobs data for May has reduced the likelihood of the two Fed rate cuts in 2024.

On the Kiwi front, traders are likely awaiting China’s CPI and PPI reports on Wednesday for insights into the economic conditions of New Zealand’s largest export market.

High interest rates in New Zealand have continued to provide sustained support to the New Zealand Dollar (NZD) despite a weakening economy. The Reserve Bank of New Zealand (RBNZ) is expected to maintain a stable policy until at least mid-2025 to allow for a thorough data assessment.