NZD/USD remains on the defensive ahead of US PMIs, RBNZ meeting on Wednesday
|- NZD/USD edges lower on Tuesday and is pressured by a combination of factors.
- Hawkish Fed expectations continue to underpin the USD and act as a headwind.
- A weaker risk tone contributes to driving flows away from the risk-sensitive Kiwi.
- Traders now eye US PMIs for some impetus ahead of the RBNZ on Wednesday.
The NZD/USD pair comes under some renewed selling pressure on Tuesday and remains depressed heading into the North American session. Spot prices, however, manage to recover a few pips from the daily low and defend the 0.62000 round-figure mark, at least for the time being.
The US Dollar buying interest remains unabated amid firming expectations for further policy tightening by the Fed, which, in turn, is seen as a key factor weighing on the NZD/USD pair. In fact, the markets seem convinced that the US central bank will stick to its hawkish stance for longer and are pricing in at least a 25 bps lift-off at the next two FOMC meetings in March and May. This, in turn, triggers a fresh leg up in the US Treasury bond yields and continues to underpin the buck.
Meanwhile, worries about economic headwinds stemming from rapidly rising borrowing costs, along with geopolitical tensions, take a toll on the global risk sentiment. This is evident from a generally weaker tone around the equity markets, which further benefits the Greenback's relative safe-haven status and drives flows away from the risk-sensitive Kiwi. The downside for the NZD/USD pair, however, remains limited ahead of the Reserve Bank of New Zealand (RBNZ) meeting on Wednesday.
The RBNZ is expected to hike interest rates by 50 bps, though some investors anticipate a pause in the policy tightening cycle in the wake of severe flooding and cyclone damage. Apart from this, investors will take cues from the accompanying policy statement for clues about the future rate-hike path. The focus will then shift to the FOMC meeting minutes, which will play a key role in influencing the USD price dynamics and help determine the next leg of a directional move for the NZD/USD pair.
Heading into the key central bank event risk, Tuesday's US economic docket - featuring the flash PMI prints and Existing Home Sales data - might provide some impetus to the NZD/USD pair. Apart from this, the broader risk sentiment should allow traders to grab short-term opportunities.
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.