NZD/USD remains below 0.6200, receives downward pressure from Chinese economic concerns

• NZD/USD receives downward pressure from the deteriorating economic outlook, in its key trading partner, China.
• Economists at Goldman Sachs and Citi have downgraded their GDP growth forecasts for China to 4.7% in 2024.
• The US Dollar struggles due to increasing expectations of a 50 basis points Fed interest rate cut on Wednesday.

NZD/USD retraces its recent gains from the previous session, trading around 0.6190 during the Asian hours on Tuesday. The antipodean New Zealand Dollar (NZD) faces challenges due to growing concerns over the health, of its key trading partner, China's economy. Analysts point out that the latest round of weak economic data indicates serious challenges for the world's second-largest economy.

Economists at Goldman Sachs and Citi have reduced their 2024 GDP growth forecasts for China to 4.7%, falling short of Beijing's target of around 5.0%. SocGen describes the situation as a "downward spiral," while Barclays calls it "from bad to worse" and a "vicious cycle." Morgan Stanley also cautions that "things could get worse before they get better," according to a Reuters report.

Traders are expected to closely monitor the People's Bank of China's (PBoC) Monetary Policy Committee (MPC) monthly review of its key lending rates on Friday, following disappointing industrial output growth and retail sales figures for August. This review could provide further insight into China's economic trajectory and its potential impact on global markets.

New Zealand's Gross Domestic Product (GDP) for Q2 is set to be released on Thursday, with markets anticipating a 0.4% quarter-on-quarter contraction following a 0.2% expansion in Q1. The decline is likely driven by continued weakness in consumer spending, raising concerns about the overall health of the economy.

The US Dollar (USD) is under pressure as expectations grow that the Federal Open Market Committee (FOMC) may opt for a significant 50 basis point rate cut on Wednesday. According to the CME FedWatch Tool, markets are pricing in a 38.0% chance of a 25 basis point Federal Reserve interest rate cut at the September meeting, while the probability of a 50 basis point cut has surged to 62.0%, up from 50.0% just a day earlier. This shift reflects heightened anticipation of more aggressive monetary easing.