NZD/USD Climbs to Highest Level Since February 16

Apr 2, 2023

The NZD/USD pair has climbed for two consecutive days and reached its highest level since February 16. The Kiwi, being sensitive to market risk, has benefited from the current risk-on environment, as the USD remains subdued. However, the bulls are wary and are looking for fresh impetus from the crucial US Core PCE Price Index.

The NZD/USD pair has gained positive momentum for two successive days and touched a peak not seen since February 16. However, the pair has encountered resistance near the 0.6300 mark, and the spot prices are currently trading within the range of 0.6270-0.6275 during the early European session.

The prevailing positive tone around equity markets has provided a significant boost to the risk-sensitive Kiwi, as investors' confidence is on the rise with the fears of a full-blown banking crisis diminishing. The hope for a robust economic recovery in China has added to the investors' optimism, and the official Chinese PMI data for March has shown the fastest growth in the services sector in 12 years. Though the growth in the manufacturing sector has slowed down, it is still higher than expected.

The uncertainty surrounding the Federal Reserve's rate-hike path has made it difficult for the USD to gain any traction. This has further increased the appeal of the NZD/USD pair. The Fed had recently signaled that it might pause the rate-hiking cycle due to the banking sector's turmoil. However, with the possibility of a widespread banking crisis averted, there are speculations that the US central bank might return to its inflation-fighting rate hikes. Moreover, three Fed officials have backed the case for more rate increases to lower high levels of inflation.

Despite the bullish sentiments for the NZD/USD pair, traders are hesitant to take aggressive bearish bets on the USD. They are waiting on the sidelines, anticipating the release of the US Core PCE Price Index, which is the Fed's preferred inflation gauge. This data is expected to play a crucial role in influencing market expectations about the next policy move, and it could drive demand for the USD in the near term. This, in turn, will determine the direction of the next move for the major.