NZD/USD Breaks Below 0.6000, Rate Cut Expectations Grow

The NZD/USD slipped to its worst level since early May, as rate cut pricing increases and China's PBoC cutting the short-term policy rate after data has suggested the economy continues to slow down.

• The NZD/USD decline followed the yuan after the PBoC cut rates on Monday, breaking below 0.6000 before taking another leg down as the US session started on Monday. The pair closed down 0.52% at 0.5979 and is off 1.59% from the start of last week.
• The pair trades well under all key EMAs, indicating a bearish bias. Technical indicators show continued selling pressure, with RSI at 33 and MACD showing increasing negative bars. A break back above resistance at 0.6000 would be needed to break the short-term trend, while next major support is at 0.6040 (April 1 lows)
• The OIS market pricing has firmed 1bp to 48.6% chance of a cut in August and a 82.4% chance of a cut in October and now prices in 70.8bps of cuts into year-end.
• The NZ-US 2yr swap spread is just off lows, now -3bps up from -5bps on Monday.
• Expiries: 0.585 ($150m), 0.6400 ($150m) July 23rd NY Cut
• The calendar is light on for the remainder of the week.