- NZD/USD appreciates as market sentiment improves following the postponement of Trump’s reciprocal tariffs.
- Weaker US Retail Sales data has intensified speculation that the Fed may lower interest rates only later in the year.
- The RBNZ is widely anticipated to lower its interest rates by 50 basis points to 3.75% on Wednesday.
NZD/USD extends its winning streak for the third successive day, trading around 0.5740 during the early European hours on Monday. Liquidity during the North American session may remain thin as all major US financial markets will be closed on Monday for the federal holiday, Presidents’ Day.
This upside of the NZD/USD pair is attributed to improved market sentiment, supported by US President Donald Trump’s decision to delay the implementation of reciprocal tariffs. Additionally, the US Dollar (USD) weakens as a disappointing US retail sales report has reignited speculation that the Federal Reserve (Fed) may cut interest rates later this year, despite ongoing inflation concerns.
Data from the US Census Bureau on Friday showed that US Retail Sales fell by 0.9% in January, following a revised 0.7% increase in December (previously reported as 0.4%). This decline was sharper than the market’s expectation of a 0.1% drop.
The US Dollar Index (DXY), which tracks the US Dollar’s performance against six major currencies, remains under pressure for the third consecutive session due to weaker US Treasury yields. As of writing, the DXY hovers around 106.70, while yields on 2-year and 10-year US Treasury bonds stand at 4.26% and 4.47%, respectively.
The Reserve Bank of New Zealand (RBNZ) is scheduled to meet on Wednesday and is expected to lower interest rates by 50 basis points to 3.75%. The central bank is also likely to signal a more gradual pace of further reductions, aiming for a rate of 3.0% or 3.25% by the end of the year. Meanwhile, the Business NZ Performance of Services Index (PSI) increased to 50.4 in January, up from a revised 48.1 in December, marking a return to a slight expansion in the services sector after ten months of contraction.
