NZD/USD weakens to near 0.5750 as traders brace for Fed rate decision

• NZD/USD softens to near 0.5750 in Wednesday's Asian session.
• The Fed is expected to announce a 25 bps rate cut on Wednesday, bringing the rates to 4.25%-4.50%.
• New Zealand's Current Account deficit narrowed as the country imported less.

The NZD/USD pair remains on the defensive around 0.5750 during the early Asian session on Wednesday. The New Zealand Dollar (NZD) struggles to gain ground as traders await the US Federal Reserve (Fed) interest rate decision on Wednesday. 

The mixed US economic data released on Tuesday had no impact on expectations that the Fed would cut interest rates at its December meeting on Wednesday. Traders have priced in a 25 basis points (bps) interest rate cut at the December meeting but lean toward a pause in January 2025. The Press Conference and the Summary of Economic Projections, or 'dot-plot' will be closely watched. The cautious tone about further cuts could lift the US Dollar (USD) and act as a headwind for NZD/USD. 

The Retail Sales in the US came in better than the market expectation, rising 0.7% MoM in November versus a 0.5% increase (revised from 0.4%) prior, the US Census Bureau showed Tuesday. Meanwhile, Industrial Production contracted by 0.1% MoM in November, compared to a fall of 0.4% (revised from -0.3%) in October, missing the estimation of the 0.3% expansion. 

New Zealand's current account deficit narrowed to $10.581B in the third quarter from $4.826B in the previous reading, according to Statistics New Zealand on Wednesday. Meanwhile, the potential Donald Trump's tariff policies could drag the Kiwi lower, as Trump said that he will impose a 10% tariff on imports from China.

Additionally, Chinese Retail Sales missed expectations in November, adding to pressure on policymakers after President Xi Jinping signaled last week that he wanted to boost household consumption. The renewed concerns surrounding China's economy weigh on the Kiwi as China is a major trading partner for New Zealand.