NZD/USD drifts lower despite subdued USD demand, NZ Q1 GDP on Thursday in focus

• NZD/USD meets with a fresh supply on Wednesday and snaps a two-day winning streak.
• The USD struggles to lure buyers amid September Fed rate cut bets and could lend support.
• The focus, meanwhile, remains on the release of the Q1 New Zealand GDP print on Thursday.

The NZD/USD pair struggles to capitalize on the previous day’s goodish rebound from sub-0.6100 levels, or over a one-week low and attracts some sellers during the Asian session on Wednesday. Spot prices currently trade around the 0.6135 region, down 0.10% for the day, though lack follow-through selling in the wake of a softer tone surrounding the US Dollar (USD).

The USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near the weekly low touched the previous day amid expectations that the Federal Reserve (Fed) will cut interest rates soon. The bets were lifted by softer US Retail Sales figures on Tuesday, which pointed to signs of exhaustion among US consumers. This comes on the back of last week’s weaker US consumer and producer prices, supporting prospects for an imminent start of the Fed’s rate-cutting cycle in September. 

Apart from this, a bullish tone across the global equity markets is seen undermining the safe-haven buck and might lend support to the risk-sensitive Kiwi. That said, mixed economic data released from China on Monday underlined a bumpy recovery in the world’s second-largest economy and is seen weighing on antipodean currencies, including the New Zealand Dollar (NZD). Apart from this, comments by the Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway exert pressure on the NZD/USD pair. 

Conway noted that inflation may be stickier in the short term, though could fall more quickly than expected in the medium term. This, in turn, could keep bullish traders on the back foot ahead of the New Zealand economic growth data for the first quarter, which is due for release on Thursday. In the meantime, the USD price dynamics might continue to influence the NZD/USD pair in the absence of any relevant market-moving economic data and relatively thin trading volumes on the back of a US bank holiday on Wednesday.