• NZD/USD weakens around 0.5920 on Thursday, pressured by a stronger US Dollar.
• Markets push back expectations for the first RBNZ rate hike after the central bank kept rates unchanged.
• Solid US employment data and rising odds of a Fed rate hold until July underpin the Greenback ahead of NFP release.

NZD/USD trades lower around 0.5920 on Thursday at the time of writing, down 0.32% on the day, as the pair remains under pressure from a broadly firmer US Dollar (USd) and shifting expectations around New Zealand’s monetary policy outlook.

The New Zealand Dollar (NZD) remains weak after the Reserve Bank of New Zealand (RBNZ) decided to keep its benchmark interest rate unchanged at 2.25% at its February meeting. The decision was accompanied by a cautious tone from Governor Anna Breman, who indicated that the domestic economy still has room to recover without generating excessive inflationary pressure. This message reinforced expectations that the central bank is in no hurry to tighten policy again. Market pricing for a first rate hike has now been pushed back to December at the earliest, marking a clear shift compared with expectations prior to the meeting.

At the same time, the US Dollar continues to benefit from resilient macroeconomic data in the United States (US). The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades near 99.00, up 0.15% on Thursday, although it has pared part of its earlier gains.

Recent economic indicators have prompted investors to scale back expectations for aggressive monetary easing from the Federal Reserve (Fed). Data released on Wednesday showed that the private sector added 63,000 jobs in February, according to the ADP Employment Change report, well above the 50,000 forecast and sharply higher than the previous revised reading of 11,000.

Additional indicators also point to underlying economic resilience. The ISM Services Purchasing Managers Index (PMI) rose to 56.1, beating expectations for a decline to 53.5 from January’s 53.8. Earlier in the week, the ISM Manufacturing PMI survey revealed that the Prices Paid component surged to 70.5 in February, far exceeding the 59.5 consensus and the previous 59.0, signaling accelerating inflationary pressures at the factory level.

As a result, traders have adjusted their policy outlook. According to the CME FedWatch tool, the chance that the Fed will keep interest rates unchanged at its July meeting has increased to 51.5%, compared with 33.4% seen earlier in the week. The next Fed rate cut is now expected for September.

Beyond macroeconomic data, geopolitical tensions are also shaping market sentiment. Analysts at Societe Generale note that escalating risks in the Middle East are encouraging investors to favor traditional safe-haven assets such as the US Dollar and the Swiss Franc (CHF), particularly heading into the weekend if no signs of de-escalation emerge.

Looking ahead, investors now turn their attention to Friday’s US Nonfarm Payrolls (NFP) report, which is expected to provide further clues about the strength of the labor market and the likely path of Fed monetary policy. A stronger-than-expected reading could reinforce the US Dollar’s current momentum and maintain pressure on NZD/USD in the near term.

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