The NZD/USD pair witnessed a dramatic intraday turnaround from a four-week high touched earlier this Wednesday after the Reserve Bank of New Zealand's (RBNZ) surprise 25 basis points (bps) rate cut. Spot prices, however, manage to defend the 0.6000 psychological mark through the early part of the European session as traders keenly await the release of the US consumer inflation figures before placing fresh directional bets. 

The New Zealand Dollar (NZD) weakened across the board after the RBNZ board members decided to cut the Official Cash Rate (OCR) for the first time since March 2020 and indicated more cuts over the coming months. The central bank cited the recent progress towards meeting the annual inflation target and weak domestic economic growth behind the surprise move, which defied expectations. The dovish tilt turns out to be a key factor behind the NZD/USD pair's steep intraday downfall of over 80 pips.

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The US Dollar (USD), on the other hand, languishes near its lowest level in more than a week amid expectations for deeper interest rate cuts by the Federal Reserve (Fed). The bets were lifted by the softer-than-expected US Producer Price Index (PPI) on Tuesday, which provided more evidence of cooling inflation. Apart from this, a generally positive tone around the equity markets undermines demand for the safe-haven Greenback and helps limit the downside for the perceived risk-sensitive Kiwi. 

Traders also seem reluctant and prefer to wait for the release of the US consumer inflation figures for cues about the Fed's rate-cut path before placing fresh directional bets. Hence, it will be prudent to wait for strong follow-through selling before confirming that the NZD/USD pair has topped out in the near term and that the recent recovery from the mid-0.5800s, or the YTD low touched last week has run its course.

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