NZD/USD extends downside to near 0.5800 as Fed's Powell signals caution on rate cuts

• NZD/USD softens near 0.5815 in Thursday's Asian session.
• Fed's Powell said risks remain on both sides of central bank's dual mandate to achieve maximum employment and stable prices.
• The RBNZ might cut rates further before Governor Brennan takes charge on December 1. 

The NZD/USD pair remains on the defensive around 0.5815 during the early Asian session on Thursday. Federal Reserve (Fed) Chair Jerome Powell struck a cautious tone on further easing on Tuesday, supporting the US Dollar (USD). The final reading of the US Gross Domestic Product (GDP) for the second quarter (Q2) will take center stage later on Thursday.

Fed Chair Jerome Powell maintained a cautious tone on Tuesday, saying the US central bank needed to continue balancing the competing risks of high inflation and a weakening job market in coming rate decisions. Traders are anticipating a 25 basis points (bps) rate cut at the remaining two Fed meetings this year and another reduction in the first quarter of 2026, in line with the central bank's guidance. The cautious tone of the Fed underpins the Greenback and acts as a headwind for the pair. 

New Zealand's Finance Minister Willis on Wednesday appointed Anna Breman as the new governor of the Reserve Bank of New Zealand (RBNZ). Breman has been appointed for five years, and she will start her new role in early December. 

The market expects an aggressive easing cycle before the new governor begins her role, which undermines the Kiwi against the USD. Swaps data compiled by Bloomberg indicated increasing expectations for a substantial 50 bps rate reduction at the RBNZ's upcoming meeting next month.

The attention will shift to the US Personal Consumption Expenditures (PCE) Price Index report for August, which will be published later on Friday. If the report shows softer-than-expected inflation outcome, this could weigh on the USD and cap the downside for the NZD/USD pair.