- NZD/USD is up for a third day in a row, climbing to a more than three-month high.
- The best the Fed has done is continue to undercut the USD and provide support by raising rates.
- Optimism about more stimulus from China is also supporting Kiwi counters.
The NZD/USD pair is attracting some follow-through buying for the third consecutive trading day on Tuesday, reaching its highest level since August 11 around the 0.6060 area during the Asian session.
The US dollar’s (USD) sell-off remains unabated amid growing consensus that the Federal Reserve (Fed) has ended its policy-tightening campaign. In addition, markets are now pricing in the possibility that the Fed will start cutting rates soon, as early as March 2024. This is leading to further declines in US Treasury yields and dragging the USD to near three-month lows, which in turn is seen as a key factor that continues to push the NZD/ USD above
In addition, optimism about additional stimulus from China is undermining safe havens and benefiting Antipodean currencies, including the New Zealand dollar (NZD). In fact, Chinese officials have promised to introduce more policy support for the country’s beleaguered real estate sector. In addition, the People’s Bank of China (PBoC) kept its benchmark Loan Prime Rate (LPR) close to record lows on Monday and also injected roughly 80 billion yuan. liquidity into the economy.
Despite the supportive factors, the NZD/USD pair is looking to capitalize on a move beyond the 0.6050-0.6055 bid zone. Traders now appear reluctant to place aggressive bets, preferring to wait on the sidelines ahead of the FOMC meeting minutes due to be released later in the US session, amid uncertainty over the timing of when Fed will start lowering rates. Investors will get a fresh look at policymakers’ views on whether the U.S. central bank should raise interest rates again.
The view, meanwhile, will play a key role in influencing short-term USD price dynamics and provide some significant impetus to the NZD/USD pair. In terms of event risk, US Economic Paperciting the release of existing home sales data, will be looked at to take advantage of short-term opportunities during the early North American session.