NZD/USD trades in the red below one-month top/0.6000 as USD firms ahead of Fed decision

• NZD/USD drifts lower and snaps a two-day winning streak to an over one-month high.
• A modest USD bounce and the cautious market mood exert some pressure on the pair.
• Investors now look to the FOMC policy decision ahead of the NZ Q2 GDP on Thursday.

The NZD/USD pair struggles to capitalize on its weekly gains registered over the past two days, to an over  one-month high,  and attracts some sellers in the vicinity of the 0.6000 psychological mark during the Asian session on Wednesday. Spot prices slide to the 0.5975 region in the last hour amid modest US Dollar (USD) uptick, though the downside seems limited as traders await the pivotal FOMC decision.

The US Federal Reserve (Fed) is widely expected to lower borrowing costs by at least 25 basis points (bps) at the end of a two-day meeting later today. Hence, the focus will be on updated economic projections and Fed Chair Jerome Powell's comments at the post-meeting press conference. Investors will look for cues about the central bank's rate-cut path, which, in turn, will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the NZD/USD pair.

Heading into the key central bank event risk, some repositioning trade assists the buck to recover slightly from its lowest level since early July. Apart from this, the cautious market mood benefits the Greenback's relative safe-haven status and exerts some downward pressure on the risk-sensitive Kiwi. Any meaningful USD appreciation, however, seems elusive amid rising bets for a more aggressive policy easing by the Fed. This, in turn, could offer support to the NZD/USD pair and help limit deeper losses.

The market focus will then shift to New Zealand's second-quarter GDP print on Thursday morning, which is expected to show that the economy contracted by 0.3% following the solid 0.8% growth reported during the March quarter. The data could drive market expectations for more interest rate cuts by the Reserve Bank of New Zealand (RBNZ) and determine the near-term trajectory for the NZD/USD pair. Nevertheless, the aforementioned fundamental backdrop warrants some caution for bears.