The NZD/USD pair has reached 0.5900 as the RBNZ is anticipated to shift towards rate cuts following the Fed’s actions. The USD Index is on the rise due to the strong US economic outlook, allowing the Fed to keep interest rates at higher levels. Fed Bostic believes that conditions for rate cuts will not be favorable towards the end of the year.
In Monday’s early American session, the NZD/USD pair is holding onto its gains around 0.5900. The Kiwi asset is maintaining its gains as the risks of a widening conflict in the Middle East have lessened, leading to increased demand for Asian currencies.
Market sentiment has improved after Iran stated that they do not have immediate plans for retaliation following Israel’s limited attack on Isfahan. This lack of further escalation in the conflict between Iran and Israel has reduced the demand for bullion.
The S&P 500 has opened positively, indicating a rise in risk appetite among market participants. 10-year US Treasury yields have increased to 4.64% as Fed policymakers argue that the current tight monetary policy framework is suitable given the strong labor demand and persistent higher price pressures.
The US Dollar Index (DXY) has surged to 106.30 due to the optimistic economic outlook in the United States, driven by strong consumer spending and tight labor market conditions. This has made Fed policymakers comfortable with maintaining interest rates at their current levels.
Atlanta Fed President Raphael Bostic stated last week that inflation progress towards the 2% target will be slower than expected, and conditions for rate cuts will not be favorable for the central bank by the end of the year. Bostic emphasized the importance of patience and not rushing into rate cuts, citing robust labor demand and resilient wage growth.
European FX is performing below the US Dollar as the Bank of England (BoE) and the European Central Bank (ECB) are expected to shift towards rate cuts earlier than the Fed. The Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) are predicted to lower interest rates later than the Fed. Traders are looking towards the November meeting for the RBNZ to start reducing borrowing rates, with no rate cuts expected from the RBA this year.