New Zealand Dollar dips with RBNZ cut in focus, Fed minutes on deck

• NZD/USD hovers near 0.5900, down 0.4% intraday as the Greenback regains footing ahead of key macro events.
• The US Dollar Index (DXY) extends modest gains toward 98.20, though upside remains limited amid firm expectations for a September Fed rate cut.
• Markets' attention now turns to Wednesday’s RBNZ meeting, with a 25 bps rate cut to 3.00% expected.

The New Zealand Dollar (NZD) weakens against the US Dollar (USD) on Tuesday, as traders reposition ahead of key macro catalysts, including the release of the Federal Reserve's July meeting minutes and the Jackson Hole Symposium later this week. The Greenback edges higher across the board amid cautious sentiment, adding pressure on the Kiwi ahead of Wednesday’s Reserve Bank of New Zealand (RBNZ) interest rate decision.

At the time of writing, NZD/USD is trading near 0.5900, matching its weakest level since August 6 and reflecting a drop of approximately 0.4% for the day. While the US Dollar Index (DXY) edges upward toward 98.20 during the American session, its upside appears capped as markets are heavily pricing in a nearly certain 25 bps rate cut by the Federal Reserve in September, which is weighing on further dollar strength.

RBNZ Expected to Cut OCR to 3.00%

Investor focus now shifts squarely to the RBNZ’s policy meeting on Wednesday, where a 25 basis-point cut from 3.25% to 3.00% is widely expected. According to a Reuters poll conducted between August 11 and 14, 28 out of 30 economists forecast the central bank will cut the Official Cash Rate (OCR) from its current level. The probability of a rate cut now stands over 90%, reflecting a broad consensus that the RBNZ is ready to step back in to support the economy.

This would be the first cut since earlier this year, after the RBNZ paused in July to assess the impact of prior easing steps. However, recent macroeconomic developments have likely tilted the balance back toward more accommodative policy.

• Unemployment rose to 5.2% in the second quarter, its highest level since 2021.
• Employment declined by 0.1%, while the labour force participation rate dropped to 70.5%, the lowest in over three years.
• Meanwhile, annual CPI inflation came in at 2.7% for the June quarter, comfortably within the RBNZ’s 1-3% target range.

Although global uncertainties persist, including trade friction and supply-side concerns tied to US tariffs, domestic inflation appears to be on a controlled trajectory. RBNZ Chief Economist Paul Conway recently acknowledged that trade policy disruptions could lower medium-term inflation, even as they threaten to suppress consumption and business investment.

What comes next? Market split on forward path

While Wednesday’s expected rate cut by the RBNZ appears to be a near-certainty, the medium-term trajectory for the interest rate cut path remains uncertain. Market analysts are divided in their outlooks. ASB Bank and Westpac Banking Corporation believe this week’s move will mark the final cut in the current monetary easing cycle. In contrast, the Bank of New Zealand (BNZ) anticipates one additional rate reduction, bringing the OCR down to 2.75% by the end of 2025. Meanwhile, both Australia and New Zealand Banking Group (ANZ) and Kiwibank forecast a more extended easing path, with the OCR potentially falling as low as 2.50% in 2026. The median market forecast points to one more 25 basis point cut in the first quarter of 2026.

Traders will closely watch the RBNZ’s Monetary Policy Statement and Governor Orr’s press conference on Wednesday for cues on the future rate trajectory. Later in the day, the release of the Federal Reserve’s July meeting minutes could offer fresh insight into the US policy outlook. Looking ahead, Friday’s Jackson Hole Symposium will take center stage, with Fed Chair Jerome Powell’s remarks likely to influence global rate expectations and broader market sentiment.