NZD/USD is taking bids to reverse weekly losses due to the RBNZ’s hawkish stance.
The Reserve Bank of New Zealand (RBNZ) has hinted at tapering by late July while keeping the benchmark rate constant.
In a calm session ahead of the Fed’s Powell, a halt in US Treasury yields tests DXY bulls.
According to recent headlines, the US PPI has become increasingly crucial for new initiative.
After the Reserve Bank of New Zealand (RBNZ) shows a hawkish leaning, the NZD/USD spikes to 0.7007, up 0.73 percent intraday around 0.7000 by early Wednesday press time. The optimism of New Zealand’s Prime Minister amid considerably stronger covid conditions than other Asia-Pacific players should further help the quotation.
In its most recent monetary policy meeting, the RBNZ left the benchmark rate at roughly 0.25 percent, which was in line with market expectations. The remarks recommending “Halt future asset purchases under the Large Scale Asset Purchase (LSAP) program by 23 July 2021” were particularly intriguing.
Read more: The RBNZ has kept the official cash rate at 0.25 percent, as predicted.
New Zealand Visitor Arrivals for May surged over the projected 1,785.7 percent to 2,531.6 percent YoY earlier in the day. “New Zealand Prime Minister Jacinda Ardern said on Wednesday that a special summit of leaders of the Asia-Pacific trade club APEC this week will address the global economic implications of COVID-19 and no big announcement is expected,” according to Reuters. It’s worth noting that the NZD/USD bulls were boosted ahead of the event on Wednesday by prospects of seeing signals of tapering and/or rate hikes in 2021.
The developments, however, contrasted with the previous day’s decline, when the kiwi-dollar pair fell to a new low since November due to broad US dollar strength. On Tuesday, the dollar gained from strong inflation figures. However, the June Consumer Price Index (CPI) data from the United States. The headline inflation rate increased from 4.9 percent to 5.4 percent year on year, while the core rate was revised up from 3.8 percent to 4.5 percent.
It should be noted, however, that the bulls of the US dollar index (DXY) have taken a respite recently, owing to steady US Treasury yields after climbing for the third day in a row.
S&P 500 Futures are still undecided amid these moves, while US 10-year Treasury rates have dropped 1.4 basis points (bps) to 1.4 percent as of press time.
As Australia’s Sydney extends lockdown for another two weeks, the NZD/USD bulls may struggle until fresh bullish factors emerge. The testimony of Federal Reserve Chairman Jerome Powell is also expected to put a damper on the pair’s gains.
Read: Fed Chair Powell’s Predictions: Three Reasons to Expect a Dollar Depreciation
A short-term significant obstacle for NZD/USD buyers before hitting the monthly peak near 0.7110 is a junction of the 21-DMA and a falling trend line from May 27 around 0.7005. Bears, on the other hand, are unlikely to be persuaded until the price remains over 0.6920, which includes multiple lows dating back to June 18./n
