NZD/USD struggles around 0.6280 as investors await PBoC policy

The NZD/USD pair is facing barriers in extending its upside above the immediate resistance of 0.6280 in the early Asian session. The Kiwi asset is expected to remain on the tenterhooks as investors are awaiting the release of the interest rate decision by the People’s Bank of China (PBoC) for further action.

To provide assistance to the economic recovery agenda in the Chinese economy, PBoC might remain dovish on interest rates. Economist at UOB Group suggests that the PBoC could reduce the Loan Prime Rate (LPR) at its next meeting on March 20. They further added, “With the need for further support measures toward the real economy and for 5Y loan prime rate (LPR) to fall further to boost demand for homes, we see the possibility for the 1Y LPR to fall to 3.55% and 5Y LPR to 4.20% in Mar, following the National People’s Congress (NPC).”

It is worth noting that New Zealand is one of the leading trading partners of China and a dovish policy by the PBoC would also be supportive of the New Zealand Dollar.

Meanwhile, the position of NZ current account deficit is impacting its long-term worthiness. Data released last week showed that the current account deficit blew out to 8.9% of Gross Domestic Product (GDP) in 2022 as the nation imported more goods and services than it exported. While S&P had forecast the deficit would be 6.7% in June last year and ease to 5.8% by mid-2023.

Bloomberg reported, "New Zealand’s credit grades with S&P Global Ratings could come under pressure if the nation’s current account deficit remains too big."

S&P500 futures are showing decent gains in the early Tokyo session after settling last week with significant losses, portraying a minor optimism in the overall risk-aversion theme. Rising expectations for a steady monetary policy by the Federal Reserve (Fed) are restoring the confidence of investors in United States equities. The US Dollar Index (DXY) has also attempted a recovery move from 103.65, however, the upside looks capped led by the banking sector’s debacle.