NZD/USD sticks to modest gains around mid-0.6200s, flirts with 200 DMA amid softer USD – by hareshmenghani NZDUSD Bonds Fed Recession Currencies
The pair trades around the mid-0.6200s during the early European session, which bulls awaiting a sustained move beyond a technically significant 200-day Simple Moving Average before placing fresh bets.
A softer tone surrounding the US Dollar turns out to be a key factor lending some support to the NZD/USD pair, though any meaningful appreciating move seems elusive. A standoff to raise the federal government's borrowing limit triggers a fresh leg down in the US Treasury bond yields and undermines the Greenback. It is worth recalling that US President Joe Biden expressed confidence that a deal could be done in time ahead of an expected meeting with congressional leaders later today.
The downside for the USD, however, seems cushioned amid fresh speculations that the Federal Reserve will stick to its hawkish stance. The bets were lifted by the Michigan survey, which showed that consumers see prices over the next five years climbing at an annual rate of 3.2% officials suggest that the US central bank will keep interest rates higher for longer.
The weaker-than-expected Chinese macro data released today pointed to a wobbly post-COVID recovery in the world's second-largest economy and fueled recession fears. Apart from this, concerns about the US debt ceiling temper investors' appetite for riskier assets. This, along with diminishing odds for further rate hikes by the Reserve Bank of New Zealand , amid a slide in inflation expectations for the first quarter, warrants caution for bulls.
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