NZD/USD falls below 0.5800 as traders adopt caution ahead of Fed Powell's speech

• NZD/USD depreciates as the US Dollar receives support from market caution ahead of Fedspeak.
• The latest Federal Open Market Committee Meeting Minutes indicated further Fed rate cuts by the year-end.
• The New Zealand Dollar faces challenges after the RBNZ surprisingly cut 50 basis points on Wednesday.

NZD/USD extends its losses for the third successive session, trading around 0.5770 during the Asian hours on Thursday. The pair depreciates as the US Dollar (USD) gains ground ahead of the speech by Federal Reserve (Fed) Chair Jerome Powell due later in the day.

However, the Greenback may face challenges as the latest Federal Open Market Committee (FOMC) Minutes from the September meeting suggested policymakers are leaning toward further rate cuts this year. The CME FedWatch Tool suggests that markets are now pricing in a 92.5% chance of a 25-basis-point Fed rate cut in October and an 78% possibility of another reduction in December.

Fed policymakers noted it would likely be appropriate to ease policy further over the remainder of 2025. Some officials mentioned the financial conditions, suggesting that policy may not be particularly restrictive. Most participants judged downside risks to employment to have increased, while upside risks to inflation had either diminished or not increased.

Traders may adopt caution as the US government shutdown entered its ninth day with no sign of progress, as the Senate on Wednesday once again rejected competing funding proposals from Republicans and Democrats to end the stalemate.

The NZD/USD pair also faced challenges as the New Zealand Dollar (NZD) struggled after a surprise larger-than-expected rate cut by the Reserve Bank of New Zealand on Wednesday. The central bank decided to cut its Official Cash Rate by 50 bps to 2.50%, the lowest level since July 2022. Traders are also expecting a 25 bps RBNZ rate cut at the next meeting in November.