- The NZD / USD attracted some buying near 0.6735, the new 2021 low.
- A positive tone around equity markets extended some support to the kiwi.
- COVID-19 troubles and hawkish expectations from the Fed continue to support the dollar.
NZD / USD returned above 0.6750 in the European session and it climbed to 0.6761, but then lost momentum. Previously, it fell to the lowest level since November 2020 on Tuesday, although a combination of factors limited the pullback. A slight improvement in global risk sentiment reflected in a rise in equity markets gave the kiwi some support.
The rises appear limited in a context of caution in financial markets given the advance of Omicron and in advance of the start of the two-day meeting of the Federal Reserve. The economic risks arising from the spread of the Omicron variant and the imposition of new restrictions in Europe and Asia could limit bullish movements in the markets.
What’s more, prospects for earlier policy adjustment by the Fed they should act as a tailwind for the greenback and prevent traders from placing aggressive bullish bets in favor of the NZD / USD.
In the face of the key risk event of the US central bank event, Tuesday’s trading could take cues from the release of the Producer Price Index (PPI) of the United States at 13:30 GMT. Apart from this, the events around the coronavirus saga and the general market risk sentiment will also be considered for some short-term opportunities around the pair.