The NZDUSD currency pair recently experienced a significant rise, reaching approximately $0.625. This change came after a period of notable fluctuations. The main reason behind this increase is the weakening of the US dollar. Investors now expect the Federal Reserve in the United States to reduce interest rates multiple times within the current year.
This expectation stems from the latest US data. It reveals a decline in short-term inflation expectations among American consumers. As of December, these expectations are at their lowest in almost three years. Such a trend typically leads to a more cautious or ‘dovish’ approach to monetary policy.
In New Zealand, the financial markets anticipate a series of interest rate cuts from the Reserve Bank of New Zealand (RBNZ). Experts predict up to four cuts this year, with the first possibly occurring as early as May. The RBNZ’s recent decisions and statements have fueled these expectations. Despite the bank maintaining the cash rate at 5.5% in November and nearly raising it, the head of the RBNZ acknowledged the unexpected slowdown in recent economic growth. This acknowledgment has increased speculation about an imminent cut in the cash rate, possibly sooner than anticipated.