NZD/USD hits one-month high, looks to build on momentum beyond mid-0.600s
|- NZD/USD touches a one-month peak on Wednesday and is supported by a softer USD.
- Reduced bets for more rate hike by the Fed and a positive risk tone weighs on the buck.
- Investors now look to the US PPI and the FOMC minutes for some meaningful impetus.
The NZD/USD pair attracts some follow-through buying for the sixth successive day on Wednesday and climbs to a one-month high, just above mid-0.6000s during the Asian session.
The US Dollar (USD) remains on the defensive in the wake of reduced bets for further interest rate hikes by the Federal Reserve (Fed), which, in turn, is seen as a key factor acting as a tailwind for the NZD/USD pair. Relatively subdued US wage growth data released on Friday eased inflationary concerns, which, along with the dovish remarks by several Fed officials suggested that the US central bank will soften its hawkish stance.
According to the Wall Street Journal (WSJ), Fed officials are signalling that a run-up in long-term interest rates might substitute for a further central bank rate hike. This leads to a further decline in the US Treasury bond yields and continues to undermine the Greenback. Apart from this, a generally positive risk tone turns out to be another factor weighing on the safe-haven buck and benefitting the risk-sensitive Kiwi.
With the latest leg up, the NZD/USD pair has rallied nearly 200 pips from the monthly low, around the 0.5870 region touched last week, though lacks strong follow-through. The markets are still pricing in the possibility of at least one more Fed rate hike move by the end of this year. This, along with concerns about escalating geopolitical tension in the Middle East, could help limit the downside for the USD and keep a lid on the major.
Traders might also prefer to wait for the release of the US Producer Price Index (PPI) and the FOMC monetary policy meeting minutes, due later during the North American session. The focus will then shift to the latest US consumer inflation figures on Thursday, This might provide fresh cues about the Fed's future rate-hike path, which will influence the USD price dynamics and provide a fresh directional impetus to the NZD/USD pair.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.