• The US Dollar rebounds on Monday, keeping the NZD/USD pair under pressure at the start of the week
• Investors await the release of the Fed’s December meeting Minutes to refine monetary policy expectations
• The New Zealand Dollar may find support from growing expectations of monetary tightening in New Zealand

NZD/USD trades around 0.5810 on Monday at the time of writing, down 0.40% on the day, marking a third consecutive day of losses. The pair remains weighed down by the rebound in the US Dollar (USD), which is recovering part of its earlier losses on mainly technical grounds after a recent period of weakness.

The renewed support for the Greenback comes against a still-fragile fundamental backdrop. Markets continue to price in the prospect of further rate cuts by the Federal Reserve (Fed) in 2026, which could limit the scope of the US Dollar’s recovery. Investors are now turning their attention to the release on Tuesday of the Minutes from the December meeting of the Federal Open Market Committee (FOMC), which may provide additional insight into internal debates and the monetary policy path envisioned by the US central bank.

According to the CME FedWatch tool, the chance of interest rates being left unchanged at the Fed’s January meeting stands at around 82%, up from the previous week, while the likelihood of a 25-basis-point rate cut has declined to about 18%. In December, the Federal Reserve cut rates by 25 basis points, bringing the target range to 3.50%-3.75%, after delivering a total of 75 basis points of cuts in 2025 amid a cooling labor market and still-above-target inflation.

On the New Zealand side, downside pressure on NZD/USD could be limited. The New Zealand Dollar (NZD) is supported by strengthening expectations of a potential rate hike by the Reserve Bank of New Zealand (RBNZ). Recent macroeconomic data point to a rebound in activity in the third quarter, suggesting a modest recovery after a prolonged period of economic weakness. In this context, RBNZ Governor Anna Breman has indicated that interest rates are likely to remain at current levels for some time, while leaving the door open to an adjustment should economic conditions continue to improve.

In the near term, NZD/USD dynamics are therefore likely to depend largely on upcoming signals from the US central bank, while New Zealand’s monetary policy outlook could provide underlying support for the New Zealand Dollar.