NZD/USD seeks stabilization above 0.6200 as US Dollar retreats

The NZD/USD pair is making efforts to achieve stability above the round-level resistance of 0.6200 in the London session. The Kiwi asset is expected to remain in the bullish trajectory as the US Dollar Index (DXY) is struggling to remain above 102.00.

S&P500 futures have posted significant losses in London as investors are worried about the United States' economic outlook. Considering testimony of Federal Reserve (Fed) chair Jerome Powell at Congress indicates that more interest rate hikes are appropriate and further policy-tightening is sufficient enough to dampen economic prospects. The risk-aversion theme has trimmed the appeal for risk-sensitive assets.

The US Dollar Index (DXY) is expected to show a perpendicular fall after dropping below 102.00. The downside bias in the USD Index has been built after dovish commentaries from Atlanta Fed President Raphael Bostic and Chicago Fed Bank President Austan Goolsbee. Both Fed policymakers are in favor of one more skip in the rate-hiking spell by the US central bank to assess the impact of interest rate hikes yet made.

Meanwhile, the New Zealand Dollar is showing strength due to the easy interest rate policy by the People’s Bank of China (PBoC). China’s central bank cuts its Loan Prime Rate (LPR) to revive the economy’s optimism, which was critically dented by pandemic controls.

Reuters reported that the dovish monetary policy by the PBoC is hurting the margins of commercial banks as households and firms are reluctant to raise credit due to bad balance sheets.

It is worth noting that New Zealand is one of the leading trading partners of China and higher monetary stimulus in China will support the New Zealand Dollar.