NZD/USD Plunges to Six-Week Lows on Powell’s Remarks, Sentiment Sour

• NZD/USD slumps more than 1% on Friday in a risk-off environment.
• Powell said it will “bring some pain to households and businesses” to achieve the Fed’s 2% target.
• US inflation readings show signs of peaking, while US consumer sentiment improves.

The NZD/USD fell to fresh weekly lows of 0.8150 on Friday, following hawkish comments from US Federal Reserve Chairman Jerome Powell, who reiterated the Fed’s work to restore price stability towards the 2% target. from the bank. Furthermore, he acknowledged that “it will require a sustained period of below-trend growth.” As a result, sentiment soured, and US equities tumbled.

NZD/USD falls on Powell’s comments and upbeat US economic data.

In the Asian session, NZD/USD opened above the 0.6220 figure, fluctuating within the 0.6180-0.6220 range ahead of the US economic data release and Powell’s Jackson Hole comments. However, once Powell took the stand, NZD/USD swung as volatility increased, sending the major to weekly lows. At the time of writing, the NZD/USD is trading at 0.6148, well below its opening price.

Summing up Powell’s comments, he said lowering inflation “will bring some pain to households and businesses” amid a period of higher interest rates, softening labor market conditions and sluggish economic growth. . The Fed Chairman reiterated that the Fed “will bring inflation back down to our 2% target,” commenting that the central bank is taking swift action to reduce demand so that it better matches supply.

Jerome Powell welcomed the July inflation figures, but was quick to add that a “single-month improvement is a long way from what the Committee needs to see” for the direction of inflation. Powell noted that being around a neutral stance was “not a place to stop or pause,” taking issue with the market’s perception of a Fed pivot that triggered a 15% rally in US equities from lows. of June.

Aside from this, the US economic calendar released consumer sentiment from the University of Michigan for August in its latest release. US citizen sentiment improved to 58.2 vs. estimates of 55.2, while inflation expectations for a one-year horizon fell to 4.8% from 5.2% last month.

Earlier on Friday, the headline and core personal consumption expenditures (PCE) price indices for July, the Fed’s favorite inflation gauge, were released. Headline PCE rose 6.3% yoy, above the 6.2% forecast, while core PCE, which excludes volatile items, slowed to 4.6% yoy vs. 4.7% forecast.

Key NZD/USD Technical Levels
NZD/USD