NZD/USD extends its downside below the 0.6000 mark, eyes on US Retail Sales

• NZD/USD edges lower to 0.5970, the lowest level since mid-November in the early Asian session.
• The markets are convinced that the Federal Reserve (Fed) will keep the interest rate unchanged in its September meeting.
• Analysts anticipate that the Reserve Bank of New Zealand (RBNZ) will maintain rates at 5.50%.
• Investors will closely watch the US Retail Sales Mom for July, RBNZ Interest Rate Decision.

The NZD/USD pair extends its downside and holds below the 0.6000 barrier on Tuesday. The pair trades at its lowest level since mid-November and is currently near 0.5970, losing 0.07% in the early Asian session. A rise in US yields is the main driver of the USD’s strength. The 10-year yield is at 4.20%, while the 2-year yield stays at 4.97%. Market participants await the Reserve Bank of New Zealand (RBNZ) interest rate decision on Wednesday, with the rate expected to remain unchanged at 5.5%.

Market players are convinced that the Federal Reserve (Fed) will keep the interest rate unchanged in its September meeting. However, the odds for an additional rate hike of 25 basis points (bps) increased to almost 40% in November. That said, the US Retail Sales from July and FOMC Minutes due later this week will offer hints for further monetary policy for the entire year. More hawkish comments from Fed policymakers might boost the Greenback and acts as a headwind for the NZD/USD pair. 

There were no relevant economic data released from the US docket on Monday. Last week, the US Bureau of Labour Statistics revealed that the US Producer Price Index (PPI) for final demand YoY rose 0.8% in July from 0.1% in June. The figure was higher than the market expectation of 0.7%. Additionally, the University of Michigan's (UoM) Consumer Confidence Index for July fell to 71.2 from 71.6, better than 71 expected. Finally, UoM 5-year Consumer Inflation Expectations declined to 2.9% for August versus 3.0% estimated and prior.

On the Kiwi front, the majority of analysts anticipate that the Reserve Bank of New Zealand (RBNZ) will maintain rates at 5.50%, a 14-year high, for the second consecutive meeting on Wednesday, according to a Reuters poll. The New Zealand Dollar might extend its downside with a dovish stance by the RBNZ.

Looking ahead, investors will keep an eye on the RBNZ Interest Rate Decision scheduled for Wednesday and the New Zealand’s Producer Price Index due on Thursday. Also, the US Retail Sales and FOMC minutes will be the key events. The monthly Retail Sales figure is expected to rise from 0.2% to 0.4% in July. The data will be critical for determining a clear movement for the NZD/USD pair.