NZD/USD climbs back to 0.6200 mark amid the emergence of fresh USD selling – by hareshmenghani NZDUSD Fed Bonds Recession Currencies
Receding bets for a 100 bps Fed rate hike in July continued exerting pressure on the USD.The NZD/USD pair
attracted fresh buying near the 0.6140 region on Tuesday and climbed closer to over a one-week high touched the previous day. The pair maintained its bid through the early European session, with bulls still awaiting a sustained move beyond the 0.6200 mark. The US dollar failed to capitalize on the overnight bounce from a one-week low and remained depressed for the third successive day amid diminishing odds for a 100 bps Fed rate hike move in July. In fact, several FOMC members said last week that they were not in favour of a bigger rate increase that the markets priced in following the release of red-hot US consumer inflation.
Despite reduced bets for a more aggressive Fed, investors seem convinced that the recent surge in US consumer inflation would force theto deliver a larger rate hike later in the year. This was reinforced by elevated US Treasury bond yields, which should act as a tailwind for the buck. Apart from this, growing fears about a global recession should limit any meaningful downside for the safe-haven greenback and cap gains for the risk-sensitive kiwi, warranting caution for aggressive bulls.
Hence, it would be prudent to wait for strong follow-through buying beyond the 0.6200 round figure before confirming that the NZD/USD pair has formed a near-term bottom. This, in turn, would set the stage for an extension of the recent bounce from the 0.6060 region, or over a two-year low touched last Thursday. Market participants now look forward to the US housing market data - Building Permits and Housing Starts - for a fresh trading impetus later during the early North American session.
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