NZD/USD bulls continue to correct the USD surge

At the time of writing, NZD/USD is trading at 0.7063 and up by some 0.31% in early Asia. The markets' attention remains on the US dollar considering the ix of rhetoric from Federal Reserve speakers.

Investors continue to weigh the likelihood of a more hawkish US Federal Reserve with a motive to battle high inflation if it persists.

Meanwhile, DXY dropped in New York after data showed that fewer Americans filed new claims for unemployment benefits last week as the labour market recovery from the COVID-19 pandemic gains traction amid a reopening economy.

The United States' Real Gross Domestic Product (GDP) expanded at an annual rate of 6.4% in the first quarter, the US Bureau of Economic Analysis reported on Thursday. The data matched the previous estimate and the market consensus.

The dollar index DXY was last down 0.02% against a basket of currencies at 91.807. It is holding below a two-month high of 92.408 reached on Friday.

Looking forward, the next major US economic focus will be producer price data on Friday.

This will come before the important June ISM and Nonfarm Payrolls next week. These data events will make for a potentially decisive week ahead, especially NFP.  However, the sharp fall in jobless claims over recent weeks point to material catch-up risk for payrolls. 

Overall, analysts at Westpac argue that taper talk likely escalates to a crescendo into the Aug 28 Jackson Hole Fed conference and ''the DXY could well explore the upper end of its 2021 89-93 range through Q3.''

As for the Kiwi, it has consolidated on its post-rebound gains overnight, trading tight ranges around the 0.70 level.

''Markets appear to be gravitating back to the “goldilocks” theme of the US economy being strong enough to keep asset prices and risk appetite afloat, but not strong enough for the Fed to lash out with a string of rate hikes,'' analysts at ANZ bank said. 

''In that environment, and with the Wellington COVID scare hopefully contained, we expect the NZD to continue nudging higher over coming days.''