NZD/USD holds gains above 0.5700 as US Dollar depreciates ahead of FOMC Minutes

• NZD/USD rose despite RBNZ’s decision to lower the Official Cash Rate by 50 basis points from 4.25% to 3.75%.
• RBNZ Governor Orr indicated that the Official Cash Rate forecast suggests a 50 basis point reduction by mid-year.
• The US Dollar remains subdued as Treasury yields fall ahead of the FOMC Meeting Minutes.

NZD/USD retraces its recent losses from the previous session, trading near 0.5720 during European hours on Wednesday. However, the pair faced challenges following the Reserve Bank of New Zealand’s (RBNZ) decision to lower the Official Cash Rate (OCR) by 50 basis points (bps) from 4.25% to 3.75%.

RBNZ Governor Adrian Orr delivers prepared remarks on the policy statement and addresses media questions at the post-meeting press conference. Orr said that the OCR path forecasts a 50 bps reduction by mid-year, likely around July, in two 25 bps increments. The economy has substantial spare capacity, making rate cuts in April and May appropriate.

However, the NZD/USD pair’s upside could be restrained amid rising risk sentiment following fresh tariff threats from US President Donald Trump. According to Bloomberg, Trump stated on Tuesday that he plans to impose a 25% tariff on foreign cars, with higher duties also expected on semiconductor chips and pharmaceuticals. He indicated that an official announcement could come as soon as April 2.

The NZD/USD pair gains support as the US Dollar (USD) struggles amid falling Treasury yields, despite ongoing caution regarding the Federal Reserve’s (Fed) policy outlook. Investors await the release of the FOMC Minutes later in the North American session.

The US Dollar Index (DXY), which measures the USD against six major currencies, has edged lower to around 107.00. Meanwhile, US Treasury yields stand at 4.30% for the 2-year note and 4.54% for the 10-year note at the time of writing.

On Tuesday, San Francisco Fed President Mary Daly noted that while US economic conditions remain positive, the outlook for rate cuts in 2025 remains uncertain. Philadelphia Fed President Patrick Harker reinforced the need for a steady interest rate policy, citing persistent inflation concerns.