NZD/USD extends its rally to three straight days, hovers around 0.6350s post-Fed Powell Q&A

NZD/USD is surging for the third consecutive day and reclaims the 0.6300 mark for the first time in four days after a raft of risk-aversion struck risk-sensitive currencies, like the New Zealand dollar. At 0.6355, the NZD/USD reflects an improved market sentiment, courtesy of no new Covid-19 cases in Shanghai for the third straight day as the city prepares to lift restrictions.

Sentiment improvement boosts the NZD appeal amidst Fed speaking

US equities remain in positive territory as Wall Street prepares for the close. Meanwhile, US Treasury yields recovered some ground, led by the 10-year benchmark note, up to eight and a half basis points, sitting at 2.970%, while the greenback gave back some of its weekly gains and sat around 103.364, down 0.79%, as portrayed by the US Dollar Index, which tracks the buck’s value.

Late in the New York session, Federal Reserve Chair Jerome Powell crossed newswires at a Wall Street Journal event. Powell said that “what we need to see is inflation coming down in a clear and convincing way and we’re going to keep pushing until we see that.” He emphasized that “If that involves moving past broadly understood levels of neutral, we won’t hesitate at all to do that.”

Recapping the last Federal Reserve meeting, the US central bank hiked rates by 50-bps. Later in the press conference, Jerome Powell said that 50-bps increases are “on the table,” as market players have priced in a 100% odds of a 0.50% rate hike in the June meeting.

Also, earlier in the day, St. Louis Fed President James Bullard said that the continued strong growth trend for the US economy is the base case outlook for the next 18 months and added that household consumption is expected to hold up well through this year. He emphasized that the base case scenario for the Fed is 50-bps rate hikes at upcoming Fed meetings.

Furthermore, Minnesota Fed President Neik Kashkari said that the Fed has indicated it will get rates to at least neutral by the end of 2022. He added that the Fed needs to bring inflation down to its 2% target before a wage-price spiral takes off.

Earlier in the North American session, the US docket featured April’s US Retail Sales met expectations and rose by 0.9% m/m. Regarding the year-over-year reading, sales grew 8.2%, crushing the expectations of 4.2%, demonstrating the resilience of American consumers. Following the positive tone of US economic data, Industrial Production rose above the expectations, further cementing the Fed’s case of hiking rates aggressively to bring inflation as soon as possible.

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