Key points:
Dollar firms on Powell’s caution
See: Dollar index trading at 104.768 as seen on the VT Markets app.
Powell highlighted a cooling job market, indicating that the Fed faces “two-sided risks” and cannot focus solely on inflation. This statement underpinned the dollar’s rebound, with the dollar index (DXY), which measures the U.S. currency against six major peers including the euro and yen, remaining flat at 105.14. It had previously dipped to its lowest level since June 13, following unexpectedly soft U.S. payrolls data.
Powell’s testimony continues before the House later today, with the CPI data for June expected on Thursday.
Kiwi Dollar weakens on dovish central bank
The New Zealand dollar weakened by 0.55% to $0.60915, pulling away from Monday’s three-week high of $0.6171. This movement followed the Reserve Bank of New Zealand’s (RBNZ) decision to hold rates steady, expressing confidence that inflation would return to its target band in the second half of the year. This confidence spurred bets on early policy easing.
The Aussie dollar surged 0.5% against the kiwi to hit NZ$1.1065 for the first time since February 2023. Australia’s dollar (AUDUSD) eased slightly by 0.1% to $0.67345, but remained close to Monday’s six-month peak of $0.67615.
You might be interested: Aussie approaches six-month high despite diverging rate expectations
For New Zealand, the central bank’s confidence in inflation control and potential for rate cuts could lead to a weaker kiwi in the near term. This could benefit exporters by making their goods cheaper on the international market, but may also signal economic challenges ahead if the rate cuts are a response to slower growth.
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