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Kiwi Soars to 6-Week High as Fed Uncertainty and Risk-On Mood Weigh on Dollar
Summary:
The New Zealand Dollar extended gains for a fifth straight session on Friday, rallying to 0.6071 against the US Dollar amid broad USD weakness, political interference concerns at the Fed, and improving consumer sentiment in New Zealand.
Trading
0.60600
ENTRY
0.62500
TGT
0.59800
SL
0.60974 +0.00012 +0.02%
0
Point
Flat
0.59800
SL
CLOSING
0.60600
ENTRY
0.62500
TGT
The New Zealand Dollar (NZD) continued its impressive rebound on Friday, extending its winning streak against the US Dollar (USD) to a fifth consecutive session as investors increasingly favored risk-sensitive assets amid mounting uncertainty over Federal Reserve policy and signs of resilience in New Zealand’s domestic economy.
At the time of writing, NZD/USD is trading around 0.6071 — its highest level in nearly six weeks — and hovering just below year-to-date highs. The move marks a sharp reversal from the pair’s recent lows, as broad-based weakness in the Greenback continues to drive momentum in favor of the Kiwi. The latest rally has been supported by a combination of geopolitical calm, hawkish repricing in New Zealand interest rate markets, and growing investor discomfort over political interference in U.S. monetary policy.
A key driver behind the Greenback’s underperformance has been rising speculation over Federal Reserve independence. U.S. President Donald Trump ramped up criticism of Fed Chair Jerome Powell this week, prompting renewed concerns over central bank autonomy just as the monetary authority tries to navigate a complex economic landscape.
Adding to investor unease, a report from The Wall Street Journal on Friday suggested Trump could name a preferred successor to Powell as early as September, with talk of a “shadow chair” — an informal advisor who would influence monetary policy in advance of Powell’s term expiration in May 2026. That prospect has unsettled markets, especially as it coincides with a noticeable shift in rate cut expectations. Traders are now pricing in three interest rate cuts for 2025, up from two earlier this week, according to the CME FedWatch Tool.
Reinforcing dovish bets, the latest U.S. inflation data showed that the Fed’s preferred price gauge — the core Personal Consumption Expenditures (PCE) Index — rose 0.2% month-on-month in May, slightly above consensus forecasts of 0.1%. On a yearly basis, core PCE climbed to 2.7% from 2.6%, modestly exceeding expectations but still pointing to sticky price pressures that are slowing the path toward the Fed’s 2% target.
Meanwhile, the U.S. Dollar Index (DXY) remained pinned near a three-year low, trading around 97.10 and showing little sign of recovery amid increased political noise and a risk-on backdrop driven by easing tensions in the Middle East.
In stark contrast to the U.S., domestic data in New Zealand painted a more encouraging picture. The ANZ-Roy Morgan Consumer Confidence Index jumped by nearly 6 points to 98.8 in June — its highest reading in half a year. Confidence improved across all subcomponents, including a notable uptick in households saying now is a good time to purchase big-ticket items, suggesting an easing in financial pessimism as inflation begins to moderate.
This rebound in sentiment comes as the Reserve Bank of New Zealand (RBNZ) appears to be nearing the end of its aggressive easing cycle. Having cut the Official Cash Rate (OCR) six consecutive times since August 2024 — from 5.5% to the current 3.25% — the central bank is now adopting a more cautious, data-dependent posture.
Governor Christian Hawkesby recently stated that a further cut in July is “not a done deal,” according to commentary from BHH Marketview. The swaps market is echoing that caution, pricing in just a 20% chance of a July cut and anticipating a shallow path of easing from here — with the OCR expected to bottom between 2.75% and 3.00% in the coming year.
This shift in tone has added to the Kiwi’s allure, particularly against the backdrop of a weakening U.S. Dollar and solid local economic underpinnings.
The broader backdrop also supports NZD strength. Market sentiment was buoyed this week by news that a ceasefire agreement had been reached between Iran and Israel after nearly two weeks of heightened hostilities. U.S. President Donald Trump confirmed on Tuesday that the truce was in effect, lifting global equities and risk-linked currencies like the NZD.
While the durability of the ceasefire remains in question — with Reuters reporting that U.S. strikes only temporarily set back Iran’s nuclear program — the short-term easing in geopolitical tension has prompted investors to rotate out of safe-haven assets like the USD and into higher-yielding currencies and equities.
Technical Analysis 
Technically, NZD/USD continues to trade within a bullish structure after recovering sharply from its six-week low earlier in the month. The pair is now preparing to test a key resistance level at 0.6075. A clear break above this zone would likely accelerate the bullish momentum and put the year-to-date highs well within reach.
Despite the strong rally, short-term momentum indicators such as the Relative Strength Index (RSI) are beginning to flash overbought signals. However, the dominant trend remains upward, underpinned by the formation of a strong minor bullish wave on the lower timeframes. A brief period of consolidation may be required to absorb overbought pressures, but dips are likely to remain shallow unless the macro backdrop shifts significantly.
Initial support sits near the 0.6020 level, followed by the more critical 0.5960 zone, which coincides with the 50-day moving average. As long as NZD/USD holds above these levels, the technical bias favors continued upside.
TRADE RECOMMENDATION
BUY NZDUSD
ENTRY PRICE: 0.6060
STOP LOSS: 0.6980
TAKE PROFIT: 0.6250
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Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.
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