- The relatively optimistic economic assessment of the RBNZ provides a strong boost to the NZD / USD.
- Market optimism also benefits the higher perceived risk currencies, such as the NZD.
- Nervousness over COVID-19 in the US weighs on the USD and continues to support the strong upward movement in the pair.
The pair NZD / USD is consolidating its post-RBNZ gains to the highest level since February 2019, keeping within a range just below the round level of 0.6900 at the start of the European session on Wednesday.
The pair has extended its recent bullish move and gained strong momentum on Wednesday in reaction to the optimistic comments from the Governor of the Reserve Bank of New Zealand (RBNZ), Adrian Orr, on the state of the economy. At the press conference after the meeting, Orr said that domestic economic activity since August has been more resilient than previously assumed previously.
Previously, the RBNZ has kept the official cash rate (OCR) stable at 0.25%, as expected, and has reiterated that rates would remain at that level at least until March 2021. New Zealand’s central bank has also introduced a new loan financing program for banks, which has been considered a sign that the possibilities of negative rates have diminished.
This, in turn, has sparked a new episode of coverage of shorts and has momentarily pushed the NZD / USD pair just above the 0.6900 level. Aside from this, optimism about a potential coronavirus vaccine continues to support market optimism, providing an additional boost to the higher perceived risk NZD.
On the other hand, promising development in COVID-19 vaccine trials has been overshadowed by concerns about the continued increase in new cases in the United States. This, along with the imposition of stricter restrictions in several US states, revived hopes for substantial US fiscal stimulus measures to support the economy, keeping US dollar bulls on the defensive.
The dollar has been seen further pressured by a weaker tone around US Treasury yields., which continues to support the bullish momentum of the NZD / USD pair. However, the overbought conditions on the short-term charts have limited any further gains and led to consolidation price action.
Given that US banks will remain closed on Wednesday in commemoration of Veterans Day, overall market risk sentiment should play a key role in influencing USD price dynamics and generating some significant trading opportunities around to the NZD / USD pair.
Credits: Forex Street
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
