NZD/USD approaches 0.6800 as risk-on impulse rebounds, NZ CPI, Fed’s Powell in focus

• NZD/USD is marching towards 0.6800 as the risk-perceived currencies gain strength
• A higher preliminary reading of NZ CPI at 7.1% may compel one more rate hike.
• The DXY has plunged below 100.70 as yields fall.

The NZD/USD pair has picked up rich bets in the Asian session from a low of 0.6734 as investors shrugged off the uncertainty over the jumbo rate hike by the Federal Reserve (Fed). The risk-on impulse has underpinned the antipodean against the US dollar index (DXY). The asset is advancing firmly and is expected to kiss the round level resistance of 0.6800 sooner.

A higher preliminary reading of kiwi’s Consumer Price Index (CPI) has raised the odds of a one more rate hike by the Reserve Bank of New Zealand (RBNZ). The yearly NZ inflation is seen at 7.1% against the prior print of 5.9%. It is worth noting that the RBNZ raised its Official Cash Rate (OCR) four times consecutively to 1.5%. The central bank elevated its OCR by 50 basis points (bps) in its last monetary policy meet and the soaring inflation is demanding at least one more hike to contain the inflation. RBNZ Governor Adrian Orr in his last speech also cleared that elevated policy rates are highly required to reduce the risks of high inflation.

Meanwhile, the US dollar index (DXY) has slipped below 100.70 after facing strong barricades to near 101.00. The 10-year US Treasury yields have tumbled below 2.95%. It looks like a profit-booking has dragged the safe-haven assets for now.

Apart from the NZ inflation, investors will focus on the speech from the Federal Reserve (Fed) chair Jerome Powell which will provide material cues about the likely monetary policy in May. This is likely to be the last appearance of Fed’s Powell before the policy announcement.