- The NZD/USD pair weakened around 0.5890 at the start of Friday’s Asian session.
- US GDP grew by 2.8% year-on-year in the second quarter, beating the forecast of 2.1%.
- Disappointing data from China and the growing likelihood of an RBNZ interest rate cut are dragging the New Zealand currency down.
The NZD/USD pair remains under selling pressure around 0.5890 during the early Asian session on Friday. Stronger US economic data has lowered some expectations for rate cuts in September, providing some support for the US dollar (USD). Later on Friday, the Personal Consumption Expenditures (PCE) – Price Index for June will be in focus.
Economic activity in the United States was stronger than expected in the second quarter (Q2), the U.S. Bureau of Economic Analysis reported on Thursday. U.S. gross domestic product (GDP) rose by 2.8% year-on-year, adjusted for seasonality and inflation, from 1.4% in the previous reading, topping forecasts for a 2%.
Federal Reserve (Fed) officials are expected to keep interest rates unchanged at their upcoming monetary policy meeting next week, with market pricing predicting the first cut will come in September.
Investors will take more cues from June’s US PCE data, which is likely to fall. Personal consumption expenditures inflation likely fell in June, in line with forecasts, mirroring a trend seen in another inflation report earlier this month. Weaker PCE inflation data could pave the way for the Fed to cut its key interest rate as early as September and weaken the US dollar.
On the Kiwi front, rising bets that the Reserve Bank of New Zealand (RBNZ) will cut its key Official Cash Rate (OCR) in August are weighing on the New Zealand dollar (NZD). Furthermore, fears of an economic slowdown in China continue to weigh on the Kiwi, as China is New Zealand’s top trading partner.
