NZD/USD Price Analysis: More downside looks likely towards 0.5770

NZD/USD recovers mildly after refreshing the yearly low near 0.5820, however, the outlook remains bearish.

The Fed is expected to take an “extended pause” after cutting interest rates next month.

Investors expect the RBNZ to cut interest rates by 50 bps to 4.25% on Wednesday.

The NZD/USD pair rebounds slightly after posting a fresh yearly low near 0.5820 in the North American session on Friday. The Kiwi pair remains on the backfoot as the US Dollar (USD) performs strongly across the board on expectations that the Federal Reserve (Fed) will follow the interest rate cut path more gradually.

Analysts at Deutsche Bank expect that the Fed could take an “extended pause” that keeps Federal Fund rates above 4% through 2025. Their comments were backed by expectations that “The Republican sweep promises transformative changes,” policies such as higher import tariffs will likely boost growth to 2.5% next year and will also lead to inflation stalling at or above 2.5% through 2026.

For the December meeting, analysts expect the Fed to cut interest rates by 25 basis points (bps). According to the CME FedWatch tool, there is a 59% chance that the Fed will cut its key borrowing rates by 25 bps to 4.25%-4.50%.

On the New Zealand Dollar (NZD) front, investors will focus on the Reserve Bank of New Zealand (RBNZ) monetary policy, which will be announced on Wednesday. The RBNZ is expected to cut interest rates by 50 bps to 4.25%. This will be the third consecutive interest rate cut by the RBNZ and the second straight 50 bps reduction in a row.