NZD/USD pressured as traders await key US events

NZD/USD is lower by some 0.25% in the open with the price dropping from a high of 0.6411 to print a low of 0.6382 so far. Nevertheless, it has been the best-performing G10 currency month to date.

''NZD seasonality is usually positive in December, but while it has that that and higher interest rates in its corner, there are no guarantees that it will finish this week un-bruised, with several central bank meetings due,'' analysts at ANZ Bank explained.

The Federal Open Market Committee is coming up this week and traders are in anticipation of a hawkish outcome with US producer inflation data for November coming in slightly hotter than expected, bolstering the case for continued interest rate hikes by the Federal Reserve even if at a slower pace.

Analysts at TD Securities expect the FOMC to deliver a 50bp rate increase at its December meeting, lifting the target range for the Fed funds rate to 4.25%-4.50%. ''In doing so, the Committee would finally move the inflation-adjusted policy stance into restrictive territory. We also look for the FOMC to signal that they will have to move to a higher terminal rate than anticipated in September.''

''Our chief concern is what this might do to the USD, which has come under pressure as the trendy “pivot” narrative has taken hold, despite clear signs of sticky US inflation,'' analysts at ANZ Bank said.''NZ factors will also play a role, with the HYEFU and GDP due this week, but they’re likely to play second fiddle to volatility and the global vibe (again!).''

In other events, the US consumer inflation report on Tuesday will set the tone for markets ahead of the Fed. Economists expect core inflation to ease to 6.1% in November from a year ago, compared with a rise of 6.3% the prior month.