NZD/USD bulls step on the gas to break fresh highs

NZD/USD is trading higher into early Asia and gained close to 1% on Thursday as markets digested and cherry-picked the positives from the Federal Reserve, US politics and data. 

As a consequence of the market's reaction to the dovish elements of the Fed on Wednesday, the US dollar has sunk all the way back into a critical area of daily and 4-hour support as follows:

Additional weakness in the greenback came despite second-quarter Gross Domestic Product data that showed that consumer spending remains very strong.

However, the headline GDP was a disappointment.

The advanced US Gross Domestic Product data for the second quarter 2 was not quite as strong as expected coming in at 6.5% QoQ, compared to expectations of 8.4%.

However, analysts at ANZ Bank explained that final demand was strong due to an 11.8% jump in consumption. Business investment rose (8.0%) while housing investment fell (9.8%). Core inflation lifted 6.1% QoQ.

''This data indicates the US economy is larger than it was prior to the pandemic.''

''The mix of data likely gave markets confidence that while the recovery is going well, the Fed is also unlikely to withdraw stimulus in the near term, resulting in a broad-based risk-on mood overnight,'' the analysts concluded. 

In other news, the US Senate has reached an agreement on a USD550b infrastructure project that was supportive to markets, weighing on the greenback due to its negative correlation to stocks. 

The S&P 500 rose 0.5% and Dow Jones gained 0.5%, while the Nasdaq was up 0.2%.