Ella 
NZD/USD is trading higher near 0.6200 during early European trade on Wednesday. The gains in NZD/USD may be due to improving risk sentiment ahead of the Federal Open Market Committee (FOMC) monetary policy meeting scheduled for Wednesday.
The U.S. dollar (USD) suffered a setback on rising expectations that the U.S. Federal Reserve (Fed) may announce a substantial 50 basis point interest rate cut on Wednesday. The CME FedWatch tool shows that the market believes that the probability of a 25 basis point rate cut is 37.0%, while the probability of a 50 basis point rate cut has increased to 63.0% from 62.0% the previous day.
In addition, falling U.S. Treasury yields also added to downward pressure on the dollar. The U.S. Dollar Index (DXY), which measures the value of the U.S. dollar (USD) against six other major currencies, gave up gains from the previous session. At press time, the U.S. dollar index was trading around 100.80, with 2-year and 10-year U.S. Treasury yields at 3.60% and 3.64%, respectively.
Quek Ser Leang and Lee Sue Ann, FX strategists at UOB Group, highlighted that further significant gains in NZD/USD are unlikely in the short term. Instead, they expect NZD/USD to trade in a range of 0.6160 to 0.6205. Longer term, they expect NZD/USD to trade in a wider range between 0.6135 and 0.6235.
New Zealand’s current account deficit widened to NZ$4.826 billion in the second quarter on Wednesday from NZ$3.825 billion in the previous quarter. The second-quarter deficit exceeded market expectations, which had expected a trade deficit of $4 billion.
In addition, traders will pay close attention to New Zealand’s second-quarter gross domestic product (GDP) data due to be released on Thursday. Gross domestic product is expected to decline 0.4% quarter-on-quarter in the second quarter, after rising 0.2% quarter-on-quarter in the first quarter. On an annual basis, economic growth is expected to fall by 0.5%, after growing by 0.3%.
