The NZD/USD currency pair hovered just above a fresh one-month low of 0.6106 on Tuesday ahead of the outcome of the RBNZ’s policy meeting on October 9th.
The Reserve Bank of New Zealand is expected to reduce its official cash rate by 50 basis points to 4.75%. It would extend the 25 basis point rate cut the central bank delivered in August – the first reduction since March 2020.
Annual CPI inflation in New Zealand slowed to a 3-year low of 3.3% in the second quarter of 2024 from 4% in Q1, thus, further approaching the RBNZ’s 1%-3% target range.
Meanwhile, investors continued assessing the outlook for US interest rates in the wake of a strong employment report that drastically affected monetary easing expectations.
Markets are now pricing in about an 86% chance of a 25 basis point rate cut at the Federal Reserve’s policy meeting in November, compared to a 47% chance a week earlier.
Only 50 basis points of rate cuts are priced in by year-end, compared to over 70 bps a week ago.
Investors are also expecting the key US CPI inflation report on Thursday that may provide further clues over the Fed’s interest rate cut trajectory.
Another highlight this week will be the minutes of the Fed’s policy meeting in September, to be released on Wednesday, while at least 7 Fed representatives are scheduled to make speeches that same day.
As of 8:34 GMT on Tuesday the NZD/USD currency pair was edging down 0.10% to trade at 0.6118.
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