NZD/USD consolidates in a tight range around 0.6000, focus shifts to RBNZ policy decision

• NZD/USD is stuck in a tight range around 0.6000 as investors are sidelined ahead of the RBNZ policy decision.
• The market mood turns cautious as robust US labor data dents Fed rate cut expectations for June.
• The USD Index consolidates as the focus shifts to US Inflation data.

The NZD/USD pair trades sideways near the psychological level of 0.6000 in Monday’s late Asian session. The Kiwi asset struggles for a direction as investors stays on sidelines ahead of the interest rate decision by the Reserve Bank of New Zealand (RBNZ), which will be announced on Wednesday.

The RBNZ is widely anticipated to keep interest rates unchanged at 5.5% as inflationary pressures are significantly higher than the desired rate of 2%.

Last week, RBNZ Governor Adrian Orr said that the central bank is on track to get inflation back within the target band.

Investors will keenly focus on cues about when the RBNZ will start cutting its Official Cash Rate (OCR). New Zealand’s weak economic prospects could spurt expectations of early rate cuts. The Kiwi economy was in a technical recession in the second half of 2023. The RBNZ could pivot to rate cuts if the economic outlook remains vulnerable.

S&P 500 futures posted some losses in the Tokyo session, portraying uncertainty among market participants. 10-year US Treasury yields jump to 4.43%. Investors turn cautious as upbeat United States Nonfarm Payrolls (NFP) report for March has dented speculation for the Federal Reserve (Fed) to begin reducing interest rates from the June meeting.

The US Dollar Index (DXY) remains rangebound, trades inside Friday’s trading range around 104.30. This week, investors will focus on the inflation data for March, which will be published on Wednesday. The consumer price inflation data will indicate about when the Fed will start reducing interest rates.