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06/09/24
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NZD/USD Weakens Amid Economic Concerns and US Employment Data Anticipation
The NZD/USD currency pair is showing signs of weakness during the Asian session on Friday, trading around 0.6220. This decline can be attributed to a negative outlook for New Zealand’s economic growth and a general sense of caution among traders. Market participants are particularly focused on the upcoming US employment data for August, which could impact the movement of the US Dollar.
Concerns surrounding New Zealand’s economic performance have led to forecasts predicting sluggish GDP growth for the year ahead. Analysts anticipate that this could result in further reductions in inflation, compelling the Reserve Bank of New Zealand to consider an additional interest rate cut in October. Such monetary policy shifts are likely to have a detrimental effect on the New Zealand Dollar.
Adding to the negative sentiment is growing anxiety regarding the economic slowdown in China. Recent adjustments by Bank of America Global Research analysts, who lowered China’s GDP growth prediction from 5.0% to 4.8%, highlight concerns about the global economic landscape. This angst tends to weigh down risk-sensitive assets, including the Kiwi, as investors adopt a more cautious approach.
On the US side, expectations are building that the Federal Reserve may begin easing its monetary policy in the near future. Current market indicators suggest a nearly 59% likelihood of a 25 basis points rate cut in September, with a further 41% chance for a more substantial 50 basis points reduction.
As traders await the latest US employment numbers, the potential for a discouraging report could further foster speculation for a significant rate cut. This could place additional downward pressure on the US Dollar, potentially intensifying market volatility in the wake of the announcement.
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