S&P 500 — US Large Cap Index
FTSE 100 — UK Blue Chips
Euro Stoxx 50 — Eurozone Leaders
DAX 40 — German Equities
CAC 40 — French Market Index
Nikkei 225 — Japan Benchmark
Hang Seng — Hong Kong Index
Shanghai Composite — China Mainland
ASX 200 — Australian Market
TSX Composite — Canada Index
Nifty 50 — India Large Cap
STI Index — Singapore Market
KOSPI — South Korea Index
Bovespa — Brazil Equities
JSE Top 40 — South Africa Index
IPC Index — Mexico Market
- NZD/USD struggles to capitalize on a modest Asian session rise amid a bullish USD undertone.
- Geopolitical uncertainties continue to underpin the safe-haven buck and weigh on spot prices.
- Traders, however, seem hesitant and move to the sidelines ahead of the crucial FOMC meeting.
The NZD/USD pair turns lower for the second consecutive day following a modest Asian session uptick to the 0.5785 region on Tuesday. Spot prices currently trade around the 0.5770-0.5765 area, just above last week’s swing low, as the US Dollar (USD) retains its bullish undertone amid geopolitical uncertainties.
The US paused its bombing campaign against Iran following roughly two weeks of strikes. Moreover, US President Donald Trump said on Monday the US was having good talks with Iran and that there was a chance of a resolution. This raised hopes of pulling the US and Iran back to the negotiating table, though the optimism fades rather quickly after Saudi Arabia, Jordan and Iraq reported drone attacks. Moreover, Trump warned that US strikes would resume if the negotiations failed to deliver, helping the safe-haven USD preserve its recent strong gains back closer to the monthly high, which continues to weigh on the NZD/USD pair.
Traders, however, seem hesitant to place aggressive bets ahead of the highly anticipated two-day FOMC policy meeting, starting later today. The US Federal Reserve (Fed) will announce its decision on Wednesday and is expected to leave rates unchanged. Hence, the focus will be on the accompanying policy statement and the post-meeting press conference. Investors will look for cues about the Fed’s future policy path, which will influence the Greenback and drive the NZD/USD pair. In the meantime, firming expectations that the Reserve Bank of New Zealand (RBNZ) will deliver another rate hike in September could support the New Zealand Dollar (NZD).
Strategists at Brown Brothers Harriman argue that “above target inflation and a more favorable domestic growth outlook argue for additional RBNZ rate hikes which is NZD supportive.” They note that at its 8 July meeting, the RBNZ lifted the Official Cash Rate by 25bp to 2.50% and signalled that “further OCR increases appear likely at upcoming meetings.” Reflecting this hawkish bias, BBH highlight that “the swaps curve price in 60bps hikes by year-end and a total of 100bps of tightening over the next twelve months to 3.50% – near the top of the RBNZ estimated neutral range (2.20%-4.10%).”
