The NZD/USD pair continues to extend its losses for the second consecutive session, trading around 0.6110 during the Asian session on Wednesday. The New Zealand Dollar (NZD) is struggling due to risk aversion ahead of key economic data releases, including the ANZ – Roy Morgan Consumer Confidence for June and the US Gross Domestic Product (GDP) for the first quarter (Q1), both set to be released on Thursday. The US Personal Consumption Expenditures (PCE) Price Index will be closely watched on Friday.

New Zealand’s Treasury has expressed concerns over a weak economy, which threatens its forecasts. In response, the Treasury is considering additional spending and revenue solutions. Economist McLeish noted recent data indicating economic weakness in New Zealand. Analysts from UOB Group expect the New Zealand Dollar (NZD) to trade within a sideways range of 0.6100 to 0.6140 or potentially drift lower towards 0.6085.

Meanwhile, the US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six other major currencies, is extending its gains for the second consecutive session, trading around 105.70. The higher yield on 10-year US Treasury bonds, currently at 4.26%, supports the DXY.

On Tuesday, Fed Governor Michelle Bowman reiterated that holding the policy rate steady for some time will likely be sufficient to bring inflation under control. Fed Governor Lisa Cook also mentioned that it would be appropriate to cut interest rates “at some point,” given the significant progress on inflation and a gradual cooling of the labour market. However, she remained vague about the timing of such easing.

Trade Idea

The New Zealand Dollar is under pressure due to risk aversion and economic concerns, while the US Dollar is gaining strength amid higher Treasury yields and expectations for steady Fed policy. Key economic data releases will likely influence market sentiment further, supporting a bearish outlook for NZD/USD.