NZDUSD Fundamental Analysis – 31-July-2024

The New Zealand dollar rose to approximately $0.591 (NZD/USD) due to a subdued US dollar as investors eagerly awaited the Federal Reserve’s meeting outcome. The Federal Reserve, which serves as the central bank of the United States, is anticipated to keep interest rates unchanged for now.

However, there are hints of a possible rate cut in September. This potential move could significantly impact the global market, currency values, and investor strategies.

Bank of Japan Tightens Monetary Policy

Simultaneously, the Bank of Japan has adjusted its short-term interest rates, increasing them to 0.25% from the previous range of zero to 0.10%. This hike indicates a shift towards tighter monetary policy, suggesting that more rate increases may be on the horizon.

The Bank of Japan’s decision reflects its response to various economic pressures and aims to control inflation while stabilizing the economy.

Upcoming Decisions from the Reserve Bank of New Zealand

In New Zealand, attention is now turning to the Reserve Bank’s meeting scheduled for next month. Investors are currently predicting a 44% chance of a rate cut, driven by recent trends in inflation and labor data, which have shown signs of softness.

This speculation highlights the market’s sensitivity to economic indicators and the central bank’s responses, which are crucial in shaping financial conditions.

Positive Business Confidence Boosts the Kiwi

July’s latest ANZ Business Outlook survey provides a positive outlook for New Zealand’s economy. Business confidence soared by 21 points to 27. Additionally, expectations for personal business activity increased by 4 points to 16.

This surge in confidence suggests that businesses are optimistic about future economic conditions, contributing to the strength of the Kiwi dollar.

• Also read: AUD/USD Fundamental Analysis – 31-July-2024

NZDUSD Fundamental Analysis – 31-July-2024

Further boosting the NZD, the Australian dollar weakened following a larger-than-expected drop in Australia’s core inflation rate for the second quarter. The decline in inflation suggests a less aggressive stance from the Reserve Bank of Australia, which in turn supports the Kiwi’s strength relative to the Australian dollar.

As global central banks navigate through complex economic landscapes, currency markets will remain highly reactive to interest rate decisions and financial data. Investors should closely monitor these developments to make informed decisions. The New Zealand dollar’s recent performance underscores the interconnectedness of global economies and the critical role of central bank policies in shaping market dynamics.

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