On Wednesday, the RBNZ’s hawkish surprise caused some short-covering in the NZD/USD pair.
COVID-
Investor morale was weighed down by 19 anxieties, preventing bulls from putting new bets.
The dollar was supported by hawkish Fed predictions, which worked together to limit the pair’s advances.
The NZD/USD pair has given up some of its hawkish RBNZ-inspired gains, retreating roughly 30-35 pips off one-week highs. The pair was last seen lingering at the psychological level of 0.7000, still up more than 0.70 percent on the day.
On Wednesday, the pair saw some short-covering activity after the Reserve Bank of New Zealand (RBNZ) startled investors by announcing that it will stop buying bonds under the LSAP program by July 23. This, combined with weaker demand for the US dollar, boosted the NZD/USD pair to an intraday high of 0.7031.
The widespread cautious atmosphere around the equity markets kept traders from placing aggressive wagers around the considered riskier kiwi as investors absorbed the RBNZ’s policy statement. The extremely contagious Delta version of the coronavirus continues to worry investors, and it has taken a toll on risk sentiment.
Aside from that, the prospect of the Fed tightening its monetary policy sooner than expected functioned as a positive for the dollar. The market’s views were bolstered by higher-than-expected US consumer inflation statistics released on Tuesday. Another factor that slowed the NZD/USD pair’s rise was this.
As a result, the spotlight on Fed Chair Jerome Powell’s congressional hearing on Wednesday and Thursday will remain intense. Market expectations regarding the Fed’s policy future should be influenced by Powell’s comments on the current inflation statistics. This will boost the USD in the short term and provide the NZD/USD pair a new directional impulse./n
