- NZD/USD consolidates the US Dollar's strength and sits at key support
- The Kiwi is tucked in below horizontal and trendline resistance that has a confluence with the 38.2% ratio.
NZD/USD is flat on the day during the late lunch hour of the US session with the US Dollar's rally slowing up after reaching 105.88 vs. a basket of currencies, the highest since December 1. NZD/USD has ranged between a low of 0.6084 and 0.6137 thus far.
On Tuesday, Fed's chairman surprised markets with a more hawkish rate outlook by saying that the board would likely need to raise interest rates more than expected in response to recent strong data and is prepared to move in larger steps if the "totality" of incoming information suggests tougher measures are needed to control inflation.
This has led the Fed funds futures markets to price in a 66% probability of a 50 basis-point hike at the Fed’s March 21-22 meeting, up from around 22% before Powell spoke on Tuesday. The rate is now expected to peak at 5.62% in September. ''Looking ahead, 25 bp hikes in May and June are priced in that would take Fed Funds to 5.50-5.75%, with nearly 30% odds of a last 25 bp hike in Q3 that would move the range up to 5.75-6.0%,'' analysts at Brown Brothers Harriman said.
''After all this, an easing cycle is still expected to begin in Q4, albeit at much lower odds. Eventually, it should be totally and unequivocally priced out into 2024 during the next stage of Fed repricing. For now, we believe the uptrends in US yields and the dollar remain intact,'' the analysts added.
Looking ahead, investors are now focused on February jobs data in Nonfarm Payrolls that is due on Friday. ''US payrolls likely mean-reverted to a still firm pace in Feb after an unexpected 517k surge in Jan. We also look for the UE rate to stay unchanged at 3.4%, and wage growth to print a strong 0.4% MoM,'' analysts at TD Securities said.
RBNZ outlook
Meanwhile, analysts at ANZ Bank said that they continue to see the reserve Bank of New Zealand hiking the OCR to a peak of 5.25% by May 2023, and holding it there until at least the end of 2024. ''But the tight labour market and uncertain cyclone impacts represent upside risks to the outlook for both inflation and the OCR.''
NZD/USD technical analysis
NZD/USD is tucked in below horizontal and trendline resistance that has a confluence with the 38.2% ratio with prospects of a firmer correction as it holds in support near 0.61 the figure.
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