Market news
18.08.2022, 07:34

NZD/USD drops to mid-0.6200s, over one-week low amid stronger USD/risk-off

  • A combination of factors drag NZD/USD lower for the fourth successive day on Thursday.
  • Hawkish Fed expectations and elevated US bond yields continue to underpin the greenback.
  • Growing recession fears also benefit the safe-haven buck and weigh on the risk-sensitive kiwi.

The NZD/USD pair prolongs its recent sharp retracement slide from over a two-month high set last week and remains under heavy selling pressure for the fourth straight day on Thursday. The downward trajectory drags spot prices to a one-and-half-week low, around the 0.6250-0.6245 region during the early European session.

With the latest leg down, the NZD/USD pair has now reversed nearly 140 pips from the overnight swing high touched after the Reserve Bank of New Zealand (RBNZ) announced its policy decision. The RBNZ announced a fourth consecutive 50 bps rate hike on Wednesday and pointed to the need to bring forward the timing of further rate increases. This, however, was largely overshadowed by growing worries about a global economic downturn, which continues to act as a headwind for the risk-sensitive kiwi. Apart from this, a modest US dollar strength further contributes to the ongoing decline.

The USD hits a fresh monthly peak and remains well supported by speculations that the Fed would stick to its policy tightening path. The bets were reaffirmed by the recent hawkish remarks by several Fed officials and mostly upbeat US consumer spending data released on Wednesday. Moreover, the minutes of the July 26-27 FOMC meeting indicated that the US central bank would not consider pulling back on interest rate hikes until inflation came down substantially. The hawkish Fed expectations remain supportive of elevated US Treasury bond yields and continue to underpin the greenback.

Recession fears, meanwhile, tempers investors' appetite for perceived riskier assets. This is evident from a generally weaker tone around the equity markets, which is seen as another factor benefitting the safe-haven buck. The fundamental backdrop favours the USD bulls and supports prospects for a further near-term depreciating move for the NZD/USD pair. Traders now look forward to the US economic docket - featuring the release of the Philly Fed Manufacturing Index, Weekly Initial Jobless Claims and Existing Home Sales - for some impetus later during the early North American session.

Technical levels to watch

 

© 2000-2024. All rights reserved.

This site is managed by Teletrade D.J. LLC 2351 LLC 2022 (Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines).

The information on this website is for informational purposes only and does not constitute any investment advice.

The company does not serve or provide services to customers who are residents of the US, Canada, Iran, The Democratic People's Republic of Korea, Yemen and FATF blacklisted countries.

AML Website Summary

Risk Disclosure

Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.

Privacy Policy

Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.

Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.

Bank
transfers
Feedback
Live Chat E-mail
Up
Choose your language / location