Traders are now gearing up for a slew of US economic data to be released today (Wednesday), which will provide a glimpse into the potential direction of the Federal Reserve's (Fed) monetary policy.
Key figures on inflation and economic growth are expected to provide clues as to whether the central bank will continue to cut interest rates or maintain a cautious approach.
In New Zealand, its central bank took a drastic step by cutting interest rates by 50 basis points. The aggressive move reflects a proactive effort to ease inflationary pressures.
However, despite the rate cut, the New Zealand dollar strengthened, supported by the central bank's positive outlook and Governor Adrian Orr's statement, which showed confidence in the country's economic resilience.
Meanwhile, the Japanese yen rose 0.6% against the US dollar, driven by safe-haven flows in a global environment still plagued by uncertainty.
The latest Fed policy meeting minutes revealed a cautious approach to interest rate adjustments, emphasizing the balance between strong economic conditions and the remaining inflation risks.
Geopolitical tensions in the Middle East also showed some easing after President Joe Biden announced a US-brokered ceasefire agreement between Israel and Hezbollah. This development has the potential to reduce the geopolitical risk premium that has weighed on market sentiment in recent weeks.
In commodity markets, oil prices remained stable as traders weighed up the opposing factors. Signs that OPEC+ may delay the recovery of additional output managed to offset the reduction in geopolitical risks associated with developments in the Middle East.
As markets digest the various data and geopolitical updates, attention will continue to be focused on central bank communications and their impact on global growth and asset prices.
