NZD/USD Rises Toward 0.6000 as Fed Independence Concerns Weigh on US Dollar

NZD/USD Nears 0.6000 as Fed Independence Fears Press USD Lower

The New Zealand Dollar (NZD) continues its upward momentum, with NZD/USD climbing near 0.6005 during early Wednesday Asian trading. This marks the fourth consecutive daily gain for the pair, supported by weakness in the US Dollar (USD) due to rising concerns over the independence of the Federal Reserve.

Fed's Independence Under Political Scrutiny

The USD is under pressure following remarks by US Treasury Secretary Scott Bessent, who on Monday claimed the Federal Reserve's mandate is drifting into areas outside of monetary policy. He called for a comprehensive review of the Fed's activities. This comment raised concerns among investors about potential political influence over central bank actions.

In response, Fed Vice Chair Michelle Bowman defended the institution, stating that independence from political interference is vital for effective policy-making. Nevertheless, the public debate has injected uncertainty into the US economic outlook, impacting dollar sentiment.

Explore more: The Role of Central Bank Independence in Currency Valuation

New Zealand Inflation Slows, Opening Door for RBNZ Rate Cuts

On the New Zealand side, softer-than-expected CPI data has opened the door for potential interest rate cuts by the Reserve Bank of New Zealand (RBNZ). Inflation has eased enough that markets now price in an 85% chance of a 25-basis-point rate cut at the RBNZ’s August meeting.

Analysts forecast at least one more rate cut by the end of the year, as the central bank aims to support growth while inflation continues to moderate.

Key Market Drivers

• NZD/USD trades at 0.6005, gaining for the fourth day in a row.
• US Fed’s independence under scrutiny, weighing on USD.
• New Zealand inflation slowdown prompts rate cut speculation.
• Traders price in an 85% probability of an RBNZ rate cut in August.
• Broader risk sentiment and central bank outlooks will guide near-term moves.

Related News: RBNZ Policy Watch: What’s Next for the Kiwi?