- NZD/USD rose despite RBNZ’s decision to lower the Official Cash Rate by 50 basis points from 4.25% to 3.75%.
- RBNZ Governor Orr indicated that the Official Cash Rate forecast suggests a 50 basis point reduction by mid-year.
- The US Dollar remains subdued as Treasury yields fall ahead of the FOMC Meeting Minutes.
NZD/USD retraces its recent losses from the previous session, trading near 0.5720 during European hours on Wednesday. However, the pair faced challenges following the Reserve Bank of New Zealand’s (RBNZ) decision to lower the Official Cash Rate (OCR) by 50 basis points (bps) from 4.25% to 3.75%.
RBNZ Governor Adrian Orr delivered prepared remarks on the policy statement and addressed media questions at the post-meeting press conference. Orr said that the OCR path forecasts a 50 bps reduction by mid-year, likely around July, in two 25 bps increments. The economy has substantial spare capacity, making rate cuts in April and May appropriate.
However, the NZD/USD pair’s upside could be restrained amid rising risk sentiment following fresh tariff threats from US President Donald Trump. According to Bloomberg, Trump stated on Tuesday that he plans to impose a 25% tariff on foreign cars, with higher duties also expected on semiconductor chips and pharmaceuticals. He indicated that an official announcement could come as soon as April 2.
The NZD/USD pair gains support as the US Dollar (USD) struggles amid falling Treasury yields despite ongoing caution regarding the Federal Reserve’s (Fed) policy outlook. Investors await the release of the FOMC Minutes later in the North American session.
The US Dollar Index (DXY), which measures the USD against six major currencies, has edged lower to around 107.00. Meanwhile, US Treasury yields stand at 4.30% for the 2-year note and 4.54% for the 10-year note at the time of writing.
On Tuesday, San Francisco Fed President Mary Daly noted that while US economic conditions remain positive, the outlook for rate cuts in 2025 remains uncertain. Philadelphia Fed President Patrick Harker reinforced the need for a steady interest rate policy, citing persistent inflation concerns.
Economic Indicator
FOMC Minutes
FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.
Next release: Wed Feb 19, 2025 19:00
Frequency: Irregular
Consensus: –
Previous: –
Source: Federal Reserve
Minutes of the Federal Open Market Committee (FOMC) is usually published three weeks after the day of the policy decision. Investors look for clues regarding the policy outlook in this publication alongside the vote split. A bullish tone is likely to provide a boost to the greenback while a dovish stance is seen as USD-negative. It needs to be noted that the market reaction to FOMC Minutes could be delayed as news outlets don’t have access to the publication before the release, unlike the FOMC’s Policy Statement.
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