- NZD/USD continues to gain over the week, more than 1%.
- US central bank policy makers continued the higher interest rate narrative longer for the fourth day in a row.
- The Fed’s Evans estimates that the Federal Funds Rate (FFR) will peak at around 4.50-4.75%.
The NZD/USD slumped as Wall Street entered its last hour of trading on risk aversion as US jobs data was mixed, while the hawkish narrative from Fed officials persists as than the high inflation affecting the US economy.
At the time of writing, the NZD/USD is trading around 0.5650 after reaching a daily high of 0.5813, far from the 20-day EMA, falling close to 100 points on the day, despite the rise in Wednesday’s RBNZ 50 basis point rate, which bolstered NZD/USD, keeping price action above 0.5700.
The Fed’s parade continued on Thursday. Fed Governor Lisa Cook called inflation “stubbornly and unacceptably high” and added that she supported the three 0.75% rate hikes as the advance will accelerate the impact of monetary policy.
Lately, Chicago Fed President Charles Evans stated that the Federal Funds Rate (FFR) is heading towards 4.5-4.75% in March 2023 and added that “we have to keep raising rates”, according to him , the Federal Reserve needed to raise 125 basis points in the last two meetings of the year, emphasizing the need to be more restrictive.
Earlier, Minnesota Fed President Neil Kashkari said the Fed needs “more work” to moderate inflation, while adding that a pause in rate hikes is “pretty far away.” Kashkari said he is “not comfortable saying that we (the Fed) are going to pause” unless they see convincing evidence that inflation is cooling.
As for the data, US initial jobless claims for the week ending Oct. 1 rose by 219,000, above estimates of 204,000, signaling the job market is cooling. . However, note that Wednesday’s ADP employment change showed private hiring rising by 208,000. Beating estimates of just 132,000. That said, traders’ attention is focused on the Non-Farm Payrolls report.
Meanwhile, the Dollar Index, a measure of the dollar’s value against its peers, is up almost 1% to 112,233, a headwind for NZD/USD.
Separately, on Wednesday, the Reserve Bank of New Zealand raised rates by 50 basis points. Initially, the NZD/USD was held back from falling and posted a weekly high at 0.5813. However, as the Fed pivot narrative dissipated and sentiment soured, the broad US dollar strength was a headwind for NZD/USD.
What to watch out for
The absence of the New Zealand docket will see traders focus on the US Non-Farm Payrolls report, along with other Fed interventions, led by New York Fed’s John Williams, Fed’s Neil Kashkari of Minnesota and Raphael Bostic of the Atlanta Fed.
Key NZD/USD Technical Levels
Source: Fx Street
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