NZD/USD nears YTD highs at 0.6090 amid generalised USD weakness

• The New Zealand Dollar appreciates for the fourth consecutive day and approaches year-to-date highs at 0.6090.
• Concerns about the Federal Reserve's independence are hurting the US Dollar.
• In New Zealand, recent data support the idea that the RBNZ will stand pat in July.

The New Zealand Dollar extends gains for the fourth consecutive day on Thursday, and is nearly 2% high on the week so far, looking highly likely to re-test year-to-date highs at the 0.6080-90 area.

A higher appetite for risk after the ceasefire in the Middle East eased geopolitical tensions, boosting the risk-sensitive Kiwi this week. On Thursday, broad-based US Dollar weakness after Trump's latest attacks on Fed Chairman Powell has provided an additional boost to the pair.

Trump called Powell "stupid and low IQ" in a press conference on Wednesday, after the Fed chair refused to signal any rate cut in the near term. Trump also weighed the possibility of anticipating the announcement of his successor, which has raised questions about the central bank's independence and is eroding the credibility of the US Dollar as the world's reserve currency.

Weak US data has boosted hopes of Fed rate cuts in September

In this context, and with recent US data revealing a softening economic outlook, investors are increasingly pricing a Fed cut in the next months, which is adding pressure on the US Dollar.

The CME's Fed Watch Tool shows a 24% chance that the Federal Reserve will ease monetary policy at their July meeting, up from 14% last week. In September, however, Futures markets are almost fully pricing a rate cut. The tool shows more than 90% odds of some monetary easing after the summer, up from levels right above 60% only one week ago.

The New Zealand calendar is light this week. The May trade surplus eased less than expected, while last week's data showed a stronger-than-expected Gross Domestic Product growth in Q1, which reinforces the RBNZ's decision to push back further interest rate cuts.