Analysis
NZD/USD maintains its bid tone near 0.6170 area, remains below four-month top ahead of US PCE
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- 1. NZD/USD gained some positive traction for the sixth successive day on Thursday.
- 2. The RBNZ’s hawkish pause continues to underpin the Kiwi amid a bearish USD.
- 3. Traders now look to the US Core PCE Price Index for some meaningful impetus.
- The NZD/USD pair attracted some dip-buying during the Asian session on Thursday and stalled the previous day’s late pullback from levels just above the 0.6200 mark, or a four-month peak. Spot prices currently trade around the 0.6170 region, up for the sixth straight day, and seem poised to prolong its recent well-established uptrend witnessed over the past month or so.
The New Zealand Dollar (NZD) continues to be underpinned by the Reserve Bank of New Zealand’s (RBNZ) hawkish pause on Wednesday. The central bank, as was widely anticipated, left its cash rate unchanged at 5.5% and warned that rates will need to remain at a restricted level for a sustained period to tackle inflation. Moreover, RBNZ Governor Adrian Orr, addressing the post-meeting press conference, noted that the inflation risk is still more to the upside and the central bank did discuss raising rates. This, along with the underlying bearish sentiment surrounding the US Dollar (USD), validates the near-term positive outlook for the NZD/USD pair.
The recent remarks from several Federal Reserve officials offered a clear signal that the central bank may be finished with the policy tightening campaign in a bid to slow demand and cool inflation. Moreover, the markets are now pricing in a cumulative 100 bps of rate cuts by the Fed in 2024, which is reinforced by a further decline in the US Treasury bond yields. The yield on the rate-sensitive two-year US government bond is at its lowest since July. This, along with a generally positive risk tone, is seen undermining the safe-haven buck, which helps offset the disappointing release of the official Chinese PMI prints and continues to act as a tailwind for the Kiwi.
The latest data published by the National Bureau of Statistics (NBS) showed that China’s Manufacturing PMI ticked down to 49.4 in November from 49.5 in the prior month. Furthermore, the Non-Manufacturing PMI dropped to 50.2 in November versus the expected 51.1 figure and the 50.6 previous. The data, however, does little to influence the NZD/USD pair, which remains at the mercy of the USD price dynamics. Hence, the market focus will remain glued to the US PCE Price Index, due for release later during the North American session. The core gauge is the Fed’s preferred benchmark for measuring longer-term inflation trends and should influence the buck.
Technical levels to watch