NZD/USD drops to near 0.6200 due to rising odds of an aggressive rate cut by the RBNZ

• NZD/USD continues to lose ground as the RBNZ is widely expected to deliver a 50 basis point rate cut in October.
• HSBC and BNZ expect the RBNZ to lower its cash rate by 50 basis points next week.
• The US Dollar received support as recent US data faded the dovish sentiment surrounding the Fed's policy outlook.

NZD/USD extends its losing streak, trading around 0.6200 during the early European hours on Friday. This downside of the pair could be attributed to dovish sentiment surrounding the Reserve Bank of New Zealand's (RBNZ) monetary policy stance next week. RBNZ is widely expected to deliver a 50 basis point interest rate cut amid concerns over weak economic growth and rising unemployment.

HSBC analysts expect the Reserve Bank of New Zealand (RBNZ) to lower its cash rate by 50 basis points in both October and November, revising their previous forecast of 25 basis point cuts for each month. Similarly, the Bank of New Zealand (BNZ) is also forecasting a 50 basis point cut from the RBNZ next week, citing disinflationary data as a key factor that could prompt the central bank to accelerate its easing measures.

The risk-sensitive NZD/USD pair could struggle due to safe-haven flows amid escalating Middle-East tensions. US President Joe Biden stated that the United States (US) is in discussions with Israel about potential strikes on Iran's Oil infrastructure. Israeli Prime Minister Benjamin Netanyahu warned that Iran "will pay a heavy price" for Tuesday's attack, which involved the firing of at least 180 ballistic missiles at Israel, according to the BBC.

The US Dollar (USD) received support from better-than-expected US ISM Services PMI and ADP Employment Change data released this week. These reports have challenged dovish expectations for Federal Reserve (Fed) monetary policy.

Federal Reserve Bank of Chicago President Austan Goolsbee said on Thursday that the interest rates need to come down over the next year by "a lot." Goolsbee further stated that he'd like to keep the unemployment rate at 4.2% and prevent it from rising any further.