NZD/USD falls toward 0.6100 as investors adopt caution ahead of RBNZ upcoming decision

• NZD/USD depreciates as traders adopt caution ahead of RBNZ interest rate decision on Wednesday.
• NZIER shadow board members recommend that the RBNZ maintain the OCR at 5.50%.
• The decline in the Treasury yields puts pressure on the US Dollar.

NZD/USD continues to lose ground for the second consecutive day, trading around 0.6120 during the early European hours on Tuesday. This decline could be attributed to the traders’ caution ahead of the Reserve Bank of New Zealand's (RBNZ) interest rate decision on Wednesday.

The Reserve Bank of New Zealand is anticipated to maintain the Official Cash Rate (OCR) at 5.50% during its July meeting on Wednesday, despite indications of a slowing economy in New Zealand. Traders will likely monitor the Monetary Policy Statement for further insights.

The New Zealand Institute of Economic Research (NZIER) shadow board members recommend that the central bank keep the OCR unchanged at the upcoming Monetary Policy meeting. The current weaker growth, slack labor market, and ongoing easing of annual CPI inflation indicate that previous cash rate increases are successfully reducing inflationary pressures in the New Zealand economy.

On the USD’s front, Treasury yields face challenges due to growing speculation that the Federal Reserve (Fed) may cut interest rates in September, potentially capping the upside for the US Dollar. The CME's FedWatch Tool shows that rate markets price in a 76.2% probability of a rate cut in September, up from 65.5% just a week ago.

Federal Reserve Chairman Jerome Powell may deliver "The Semi-annual Monetary Policy Report" to the US Congress on Tuesday. Powell could provide a broad overview of the economy and monetary policy, with his prepared remarks being published ahead of his appearance on Capitol Hill.