Key Points
- The NZD/USD pair is showing a consistent trend of buying, now reaching the mid-0.5900s after three days of gains.
- The US dollar has weakened due to lower PMI data and easing Middle East tensions, benefiting the NZD/USD pair.
- Upcoming US economic events, like GDP and PCE data, could impact the Fed’s policy expectations, affecting the NZD/USD trajectory.
The NZD/USD currency pair has exhibited a notable trend of follow-through buying for the third consecutive day, finding itself in the mid-0.5900s during Wednesday’s Asian trading session. This sustained buying momentum suggests burgeoning confidence among investors, steering the pair towards potential upper limits not previously tested in recent sessions.
US PMI Slump and Mideast Peace Boost NZD/USD
Several factors are currently influencing the dynamics of the NZD/USD pair. Firstly, a modest weakness in the US dollar has provided a backbone for the recent uplift. US PMI data signalling a loss of economic momentum has contributed to this softening stance, alongside easing geopolitical tensions in the Middle East, which traditionally benefit perceived riskier assets like the New Zealand dollar.
On the other hand, the US equity markets maintain a generally positive tone. Expectations of a hawkish Federal Reserve drive this, along with the elevated Treasury yields. As a result, these factors act as a counterbalance, which ensures that gains in the NZD/USD are kept in check.
Economic Events to Watch: US GDP and PCE Data Imminent
Several key upcoming events will likely influence the near-term trajectory of the NZD/USD pair in the US economic calendar. Later on Wednesday, the North American session will bring the US Durable Goods Orders, which are pivotal in assessing manufacturing strength and could sway USD valuations. Thursday’s advance US Q1 GDP print and Friday’s US Personal Consumption Expenditures (PCE) Price Index will further provide critical insights into the economic health of the US, potentially guiding Fed policy expectations.
Federal Reserve Predicts Less Than 40bps Cuts Through 2024
The Federal Reserve’s current posture remains decidedly hawkish, with no rate cuts anticipated in June and less than two cuts expected throughout 2024, totalling around 40 basis points. This firm stance, reflected in high Treasury yields, is a crucial element supporting the strength of the US dollar. The NZD/USD pair’s aggressive rise may be hindered as the market evaluates US economic policy against global economic trends.
Cautious Bullishness on NZD/USD Amid Strong US Dollar
The upcoming US economic data and current Fed policy expectations may cap the NZD/USD’s aggressive bullish bets. Consequently, this could limit any significant upward movement. Investors must cautiously balance optimism for the New Zealand dollar against a strengthening US dollar driven by domestic economic resilience. The dynamics’ interplay will critically shape the NZD/USD currency pair’s movements, demanding attention to micro and macroeconomic indicators.
