The dollar strengthened after Federal Reserve Chair Jerome Powell hinted at a more cautious approach to interest rate cuts, causing the New Zealand dollar to weaken. While Powell acknowledged the cooling job market, he emphasized the need for greater confidence in reaching the 2% inflation target before a rate cut is considered. The markets are currently predicting a rate cut by September, but uncertainties around economic data could delay this decision.
Powell’s testimony to Congress highlighted the two-sided risks facing the economy, leading to a flat dollar index at 105.14. Traders are closely watching for the release of CPI data for June and further economic indicators before making firm predictions on rate cuts. The Reserve Bank of New Zealand’s decision to hold rates steady, despite expressing concerns about inflation, suggests a potential shift towards a more dovish stance in future monetary policy.
As Powell continues his testimony and with upcoming economic data releases, the currency markets remain uncertain about the timing of potential rate cuts. The New Zealand dollar and Australian dollar faced volatility in response to central bank decisions and market expectations. Powell’s cautious approach has left room for further data analysis before committing to any definitive monetary policy changes, keeping investors on edge about future developments in global currency markets.
