NZD/USD posts modest gains below 0.6100, focus on Fed’s Powell testimony
|- NZD/USD holds positive ground around 0.6085 in Wednesday's early Asian session.
- The US February ISM Services PMI fell to 52.6 vs. 53.4 prior, weaker than expected.
- RBNZ remains alert for further inflation shocks and wants to see it back at the 2% target before lowering rate.
The NZD/USD pair posts modest gains below the 0.6100 psychological mark during the early Asian session on Wednesday. The decline of the US Dollar (USD) and Treasury bond yields after the softer ISM services data provides some support to the pair. Investors shift their focus to Chair Jerome Powell’s first testimony, followed by the ADP report, due later on Wednesday. At press time, NZD/USD is trading at 0.6085, gaining 0.02% on the day.
On Tuesday, the US February ISM Services PMI fell to 52.6 from 53.4 in January, weaker than the estimation of 53.0. The New Orders Index rose to 56.1 from the previous reading of 55.0. The Employment Index dropped to 48.0 versus 50.5 prior, and the Prices Paid Index declined to 58.6 from 64.0 in the previous reading.
Federal Reserve (Fed) Chair Powell’s testimony to the Senate Banking Committee on Wednesday will take center stage. Investors believe that Fed Chair Powell will err hawkish and emphasize the need for more data to be confident in cutting interest rates. The hawkish remarks from Fed officials might lift the Greenback and weigh on the NZD/USD pair.
On the Kiwi front, Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway said on Wednesday that the falls in inflation are encouraging and interest rates will need to stay restrictive for a sustained period of time. Last week, the RBNZ decided to leave the policy rate unchanged at 5.50% for the fifth meeting in a row. Governor Adrian Orr reiterated during the press conference that the central bank was concerned about underlying inflation and how growing inflation is easing. He further stated that the Official Cash Rate (OCR) needed to stay in the restrictive zone for a “sustained” period to ensure inflation returned to the 1-3% target.
Markey players will focus on Fed Chair Powell’s testimony, ADP report, and JOLTS Job Openings on Wednesday. On Friday, the US labor market data will be released, including US Nonfarm Payrolls (NFP), Average Hourly Earnings, and Unemployment Rate.
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