NZD/USD flat lines near 0.5850 on worries over Fed's independence

• NZD/USD trades flat around 0.5860 in Wednesday's early Asian session.
• Trump said he is firing Fed governor Lisa Cook, raising concerns over the Fed's independence. 
• RBNZ's dovish tone might cap the pair's upside. 

The NZD/USD pair holds steady near 0.5860 during the early Asian session on Wednesday. Rising concerns over the Federal Reserve's (Fed) independence could weigh on the US Dollar (USD) against the New Zealand Dollar (NZD). The preliminary reading of the US Gross Domestic Product (GDP) for the second quarter (Q2) will be in the spotlight on Thursday, ahead of the Personal Consumption Expenditures (PCE) Price Index report for July. 

US President Donald Trump stated on Monday that he has fired Fed Governor Lisa Cook, the first instance of a president firing a central bank governor in the Fed's history. On Tuesday, Trump said that he will soon have a "majority" of his nominees on the Fed board who will back his desire to slash interest rates. In response, Cook said Trump has no authority to fire her from the central bank, and she will not resign. 

The unpredictable actions of the Trump administration and the prospect of a more dovish Fed could undermine the Greenback and act as a tailwind for the pair in the near term. Traders are now pricing in nearly an 85% odds for a cut of at least a quarter-point at the Fed's September meeting, up from 75% last week, according to the CME FedWatch tool.

"President Trump is undertaking a risky and possibly ineffective battle against the Fed. To get a majority of the FOMC to toe the Trump line would take seven voters, not just two or even four," said Brian Jacobsen, chief economist at Annex Wealth Management.

On the other hand, the dovish tone from the Reserve Bank of New Zealand (RBNZ) might weigh on the Kiwi against the USD. The New Zealand central bank cut its policy rate by 25 basis points (bps) to a three-year low of 3.00% last week and signaled further reductions in coming months as policymakers warned of domestic and global headwinds to growth. RBNZ Governor Christian Hawkesby noted that the outlook is data-dependent, adding that if businesses and consumers remain cautious and need more support, that might be something that prompts more action.