NZD/USD climbs to 0.6035 area as USD edges lower ahead of Fed rate decision

• NZD/USD regains positive traction on Wednesday amid a modest USD weakness.

• Reduced RBNZ rate cut bets underpin the NZD and further support spot prices.

• Geopolitical risks and trade uncertainties might cap ahead of the Fed decision.

The NZD/USD pair attracts some dip-buying near the 0.6000 psychological mark during the Asian session on Wednesday and reverses a part of the previous day's retracement slide from the vicinity of the year-to-date peak. Spot prices, however, remain confined within a familiar range held over the past two weeks or so and currently trade around the 0.6030 area as traders keenly await the outcome of a two-day FOMC policy meeting.

The US Federal Reserve (Fed) is scheduled to announce its decision later during the US session and is widely expected to keep its benchmark rate unchanged amid concern that US President Donald Trump's tariffs could push up consumer prices. Hence, the accompanying policy statement, which includes the updated dots plot, and Fed Chair Jerome Powell's comments during the post-meeting press conference will be scrutinized closely for cues about the future rate-cut path. This, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide some meaningful impetus to the NZD/USD pair.

Heading into the key central bank event risk, expectations that the Fed will resume its rate-cutting cycle in September amid signs of easing inflation and a slowing economy fail to assist the USD to capitalize on the previous day's strong move up. This, along with rising bets for just one more interest rate cut by the Reserve Bank of New Zealand (RBNZ), acts as a tailwind for the New Zealand Dollar (NZD) and the NZD/USD pair. However, a combination of factors might keep a lid on any further gains.

Investors remain on edge amid persistent trade-related uncertainties and rising geopolitical tensions in the Middle East. Hence, it will be prudent to wait for a sustained strength above the 0.6065-0.6070 supply zone before placing fresh bullish bets around the NZD/USD pair and positioning for any meaningful upside in the near term.