The New Zealand Dollar (NZD) encountered selling pressure on Tuesday, declining by 0.58% against the US Dollar to settle at 0.5700. This drop marked a pullback from last week's rally when the pair reached its highest levels since late January, climbing above 0.5730. Despite the current dip, the broader outlook for the NZD remains positive, with the 100-day Simple Moving Average (SMA) resting at 0.5825 and still capturing attention.
The currency's movement comes ahead of an anticipated decision by the Reserve Bank of New Zealand (RBNZ) to lower the Official Cash Rate. The market expects a rate cut of 50 basis points, reducing the rate from 4.25% to 3.75%. This decision is set to be announced on Wednesday at 01:00 GMT. The prospect of this rate cut has influenced the recent performance of the NZD, contributing to its decline on Tuesday.
Meanwhile, the Reserve Bank of Australia (RBA) recently cut interest rates as anticipated. Michele Bullock from the RBA stated that higher interest rates have been effective in slowing economic activity and curbing inflation. Bullock emphasized that the rate cut does not signal the start of a series of reductions. This cautious approach from Australia's central bank has also played a role in shaping market perceptions and movements.
The NZD's drop on Tuesday is seen as a natural correction following last week's rally rather than a reflection of negative sentiment. Market analysts suggest that while short-term fluctuations are expected, the long-term prospects for the NZD remain favorable.