NZD/USD slides back closer to mid-0.5700s, eyes YTD low ahead of US Retail Sales

• NZD/USD meets with a fresh supply on Tuesday and is pressured by a combination of factors.
• The RBNZ’s dovish outlook, China’s economic woes and trade war fears undermine the Kiwi.
• Bets that the Fed will pause its easing cycle and elevated US bond yields boost benefit the USD.
• Traders look to the US Retail Sales for some impetus ahead of the Fed decision on Wednesday.

The NZD/USD pair attracts fresh sellers in the vicinity of the 0.5800 mark and extends its steady intraday descent through the first half of the European session on Tuesday. Spot prices drop to the 0.5755 area in the last hour and remain close to the lowest level since October 2022 touched on Monday.

The New Zealand Dollar (NZD) continues with its relative underperformance on the back of the Reserve Bank of New Zealand's  (RBNZ) dovish stance and bets for a more aggressive policy easing by the central bank. Apart from this, concerns about China's economic recovery and the US-China trade war turn out to be another factor undermining antipodean currencies, including the Kiwi. This, along with the emergence of some US Dollar (USD) did-buying, is seen exerting some downward pressure on the NZD/USD pair.

Investors now seem convinced that the Federal Reserve (Fed) will slow the pace of its rate-cutting cycle next year amid signs that the progress on bringing inflation to 2% has stalled. Moreover, speculations that US President-elect Donald Trump's policies may lead to an increase in government borrowing, and boost inflation, remain supportive of elevated US Treasury bond yields. This, along with geopolitical risks stemming from the worsening Russia-Ukraine war and tensions in the Middle East, benefits the safe-haven buck. 

Traders now look forward to the release of the US monthly Retail Sales figures for short-term opportunities later during the early North American session. The focus, however, will remain on the outcome of the crucial two-day FOMC meeting on Wednesday. Investors will closely scrutinize the accompanying policy statement and Fed Chair Jerome Powell's speech for cues about the future rate-cut path. This, in turn, should influence the near-term USD price dynamics and provide a fresh directional impetus to the NZD/USD pair.