Anna 
The NZD/USD pair is experiencing a significant sell-off, diving to the key support level of 0.6100, driven by a combination of negative factors. The New Zealand Dollar (Kiwi) is under pressure due to prevailing dismal market sentiment and a dovish stance from the Reserve Bank of New Zealand (RBNZ).
In its latest decision, the RBNZ opted to maintain the Official Cash Rate (OCR) at 5.50%, marking the fifth consecutive time without a change. The central bank’s decision is aimed at sustaining downward pressure on inflation, with the expectation that consumer price inflation will return to the desired range of 1%-3% by the third quarter of 2024.
Despite this, the outlook for further policy tightening by the RBNZ has diminished considerably. The central bank has expressed concerns about potential risks to the New Zealand economy, leading to a more cautious approach. Forecasts from the RBNZ indicate no anticipated rate cuts before 2025.
The Kiwi’s decline is exacerbated by an overall cautious market sentiment. Investors are eagerly awaiting the release of the United States core Personal Consumption Expenditure price index (PCE) data for January on Thursday. This key inflation indicator will offer insights into the Federal Reserve’s (Fed) potential actions regarding interest rates.
Analysts’ consensus suggests a 0.4% month-on-month growth in the core PCE price index, compared to a 0.2% increase in December. On an annual basis, underlying inflation data is expected to have decelerated to 2.8% from 2.9% in December. Soft inflation figures may heighten expectations of rate cuts by the Fed, contributing to the negative pressure on the NZD/USD pair.
Traders are advised to closely monitor upcoming economic data releases and central bank communications for further cues on the future direction of the NZD/USD pair.
