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IPC Index — Mexico Market- NZD/USD turns lower for the third straight day on Friday amid a modest USD strength.
- The Fed’s projected two 25 bps rate cuts and geopolitical risks underpin the Greenback.
- China’s stimulus optimism could help limit losses for the antipodean currency – Kiwi.
The NZD/USD pair struggles to capitalize on the overnight bounce from the 0.5725-0.5720 area and attracts fresh sellers during the Asian session on Friday. Spot prices currently trade with mild negative bias around mid-0.5700s, down for the third straight day amid a modest US Dollar (USD) uptick.
The Federal Reserve (Fed) earlier this week maintained its forecast for only two 25 basis points rate cuts by the end of this year. Adding to this, Fed Chair Jerome Powell said that the progress in achieving the inflation target could see a delay in the wake of the tariff retaliation by other countries on the US. This, in turn, is seen acting as a tailwind for the Greenback, which is looking to build on this week’s bounce from a multi-month low and acting as a headwind for the NZD/USD pair.
Apart from this, persistent geopolitical risks stemming from fresh conflicts in the Middle East and the protracted Russia-Ukraine war lend additional support to the safe-haven buck. However, the growing acceptance that the Fed would resume its rate-cutting cycle sooner than expected, amid concerns over a tariff-driven US economic slowdown, might hold back the USD bulls from placing aggressive bets. This, in turn, should help limit any further downside for the NZD/USD pair.
This, along with the latest optimism over China’s stimulus measures announced recently, should support antipodean currencies, including the New Zealand Dollar (NZD). In the absence of any relevant market-moving economic releases from the US, the fundamental backdrop makes it prudent to wait for strong follow-through selling before confirming that the NZD/USD pair’s uptrend witnessed since the beginning of this month has run out of steam and positioning for further losses.
