FX.co ★ Kiwi Dollar Hovers at Two-Week Low

The New Zealand dollar steadied at approximately $0.585 on Monday, maintaining a three-day decline to its lowest point in over two weeks, largely affected by the Reserve Bank's dovish outlook. Recent data revealed that the economy contracted more than anticipated in the second quarter, while the trade deficit exceeded predictions. Consequently, the market has fully priced in a 25 basis points rate cut for October and considers a 25% probability of a larger 50 basis points reduction. Adding further strain, the US dollar strengthened following comments from Fed Chair Powell, who indicated that inflation risks remain skewed to the upside and referred to the recent rate cut as a precautionary measure. Investors are now looking for new cues from Federal Reserve officials, alongside an important US inflation report expected later this week. Meanwhile, sentiment was largely unaffected by the People's Bank of China's decision to keep loan prime rates unchanged, offering no new impetus for Chinese demand, although economic data suggests a worsening slowdown. The New Zealand dollar continues to be closely linked to Chinese economic signals due to robust trade relationships.