NZD/USD weakens below 0.5850 on dovish RBNZ cut

• NZD/USD softens to around 0.5825 in Thursday's early Asian session.
• Fed Minutes showed most officials saw inflation as a greater risk.
• RBNZ cut its benchmark cash rate by 25 bps to a three-year low of 3.0% on Wednesday.

The NZD/USD pair loses ground near 0.5815 during the early Asian session on Thursday. The New Zealand Dollar (NZD) weakens against the US Dollar (USD) after the Reserve Bank of New Zealand (RBNZ) delivered a rate cut and left the door open for further moves lower. Traders await the preliminary reading of the US S&P Global Purchasing Managers Index (PMI) reports for August, which are due later on Thursday. 

The minutes from the Federal Reserve's (Fed) July 29-30 meeting showed that almost all participants at the Fed viewed it as appropriate to maintain the benchmark interest rate in the 4.25%-4.50% range. Policymakers noted that it would take time to have more clarity on the magnitude and persistence of higher tariffs' effects on inflation. 

Most Fed officials also emphasized inflation risks as outweighing concerns over the labor market at their meeting last month. Investors brace for the Fed's annual Jackson Hole symposium on Friday to see whether Fed Chair Jerome Powell will push back against market expectations for a rate cut at the September meeting. 

Any surprise dovish remarks from Fed officials could undermine the Greenback and create a tailwind for the pair. Fed funds futures traders are currently pricing in an 83% chance of a cut next month and 54 basis points (bps) of cuts by year-end, according to the CME FedWatch tool. 

As widely expected, the RBNZ cut its Official Cash Rate (OCR) by 25 bps to a three-year low of 3.0% at its August meeting on Wednesday. The New Zealand central bank noted the economy had stalled in the past few months, with households and businesses cautious due to rising prices, a soft labor market, and global uncertainty.

The Monetary Policy Committee (MPC) said there is scope to lower the OCR further, which might weigh on the Kiwi against the USD. RBNZ governor Christian Hawkesby said that further data on New Zealand's economic recovery will determine the RBNZ's next steps.