NZD/USD softens below 0.6000 as RBNZ says economic downturn could get worse

• NZD/USD edges lower to 0.5970 in Tuesday's Asian session. 
• Markets are widely expecting the Fed to cut rates by 25 bps when it announces its policy decision on Thursday. 
• The RBNZ stated the economic conditions remain challenging and business is doing it tough. 

The NZD/USD pair weakens to near 0.5970 on Tuesday during the Asian trading hours. The modest recovery of the US Dollar (USD) and the remarks from the Reserve Bank of New Zealand (RBNZ) weigh on the pair. Investors brace for the outcome of the US presidential election, which might trigger the volatility in the financial markets. 

The decline in the Greenback is likely due to a poll released over the weekend that reduced the probability of Republican Donald Trump winning the elections. Analysts said a Harris win might benefit the riskier currencies like the New Zealand Dollar (NZD), while a Trump victory could support the USD due to expected protectionist policies and higher inflation.

On Thursday, the Federal Reserve will announce its latest policy decision, with markets widely anticipating that the US central bank will cut interest rates by a quarter percentage point. Financial markets are now pricing in nearly a 98% possibility of a quarter point reduction and a near 80% odds of a similar-sized move in December, according to CME's FedWatch tool. 

On the Kiwi front, the RBNZ noted on Tuesday that the economic conditions remain challenging and business is doing it tough, adding that geopolitical tensions are the key risk for the economy. The RBNZ began cutting the Official Cash Rate (OCR) in August and stepped up the pace last month when it lowered the OCR by 50 bps to 4.75%. Most economists expect another 50 bps reduction on November 27.