- NZD/USD reverses post RBNZ decline to 0.6100 zone amid subdued demand around USD.
- Signs of stability in the markets weigh on the USD and offer support to the perceived riskier NZD.
- Expectations for an aggressive rate hike from the Fed benefit the USD and cap the pair ahead of the US CPI report.
The pair NZD/USD has attracted some buying near the 0.6100 level on Wednesday and has again approached the high of the previous day. The pair is now trading in the 0.6130-0.6135 zone and could now be looking to ride the previous day’s bounce from a more than two-year low.
The US dollar consolidated in a tight range below two-decade highs hit on Tuesday, amid signs of stability in financial markets. This, in turn, offered some support to the more risky NZD, which had previously ignored the Reserve Bank of New Zealand’s early decision to raise interest rates by 50 basis points.
Nevertheless, growing fears of a possible global recession should curb any bullish moves in the markets. Aside from this, expectations that the Fed will maintain its aggressive tightening policy to rein in persistently high inflation should benefit the USD and cap NZD/USD gains.
It is worth remembering that the FOMC minutes released last week indicated that another rate hike of 50 or 75 basis points is likely at the July meeting. Monetary policymakers also emphasized the need to fight inflation, even if this translates into an economic slowdown. Therefore, attention will continue to be focused on the publication of the latest CPI consumer inflation figures in the United States.
The US Headline CPI, to be released later in the American session, is expected to rise to 8.8% yoy in June, compared to 8.6% the previous month. Stronger-than-expected data will reaffirm expectations for a faster Fed rate hike, which in turn should be enough to give the dollar a further boost and drag NZD/USD lower.
NZD/USD technical levels
Source: Fx Street
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