NZD/USD extends the decline to near 0.5950, all eyes on Fed rate decision

• NZD/USD weakens to around 0.5955 in Wednesday's early Asian session. 
• The US Fed is unlikely to cut rates at its July meeting on Wednesday. 
• Trade optimism and the potential extension of the US-China trade truce might help limit the NZD's losses. 

The NZD/USD pair extends its downside to around 0.5955 during the early Asian session on Wednesday. Uncertainty surrounding the United States (US) and China tariff truce continues to undermine the China-proxy Kiwi. Investors will closely monitor the US Federal Reserve (Fed) interest rate decision later on Wednesday, with no change in rates expected. 

Analysts expect the US Fed will leave interest rates unchanged at 4.25% to 4.50% at the end of its two-day monetary policy meeting on Wednesday. Traders are now pricing in nearly a 97% odds of no change to interest rates at the July meeting, according to the CME FedWatch tool. 

Fed members remain cautious about the potential inflationary impact of US President Donald Trump's aggressive new tariff policy. Traders will keep an eye on the Fed Chair Jerome Powell's Press Conference after the policy meeting. A more hawkish-than-expected outcome from the meeting could boost the Greenback and act as a headwind for the pair. 

The attention will shift to the US employment data for July, which is due later on Friday. The US economy is projected to add 110K jobs in July, while the Unemployment Rate is estimated to tick higher to 4.2% in July from 4.1% in June. 

US Treasury Secretary Scott Bessent said that the US and China will continue talks over maintaining a tariff truce before the deadline in two weeks, and Trump will make the final decision on any extension. Bessent tamped down any expectation of Trump rejecting the extension. Trade optimism and a possible extension of the US-China trade truce could provide some support to the China-proxy New Zealand Dollar (NZD) in the near term, as China is a major trading partner of New Zealand.