NZD/USD refreshes five-day low near 0.5900 as Fed Powell leans toward more rate hikes
|- NZD/USD hovers near a five-day low around 0.5900 on hawkish commentary from Fed Powell.
- Fed Powell said that current interest rates don’t seem sufficiently restrictive to ensure price stability.
- The Chinese economy shifts into deflation due to poor consumer spending.
The NZD/USD pair printed a fresh five-day low marginally below 0.5900 as Federal Reserve (Fed) Chair Jerome Powell supported for raising interest rates further. The Kiwi asst fell sharply as more interest rate hikes from the Fed would widen policy divergence between the latter and the Reserve Bank of New Zealand (RBNZ).
S&P500 futures added nominal gains in Tokyo. US equities were heavily sold on Thursday after Fed Powell said that current interest rates don’t seem sufficiently restrictive to ensure price stability. The US Dollar Index (DXY) consolidates near the crucial resistance of 106.00. More upside in the USD Index is highly likely as the market mood has turned risk-averse after hawkish remarks from Jerome Powell. 10-year US Treasury yields correct to near 4.61%.
Last week, the Fed kept interest rates unchanged in the range of 5.25-5.50% and emphasized keeping interest rates higher for a longer period to bring down inflation to 2%. Therefore, hawkish commentary from Fed Powell was a surprise for market participants.
Apart from Jerome Powell, interim St. Louis Fed President Kathleen O’Neill Paese said "It would be unwise to suggest that further rate hikes are off the table".
Meanwhile, global slowdown fears due to Middle East tensions and deflationary pressures in China have impacted the appeal of the New Zealand Dollar. Weak consumer spending due to lower employment has pushed the Chinese economy into a deflation. Chinese producers continue to cut prices of goods and services at their factory gates due to a poor demand environment.
It is worth noting that New Zealand is one of the leading trading partners to China and an economic slowdown in China impacts the New Zealand Dollar.
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.