NZD/USD rallies on the back of a less hawkish than priced Fed

• NZD/USD rallies on US dollar weakness following the Fed. 
• The Fed has dialled back 75bps rake hike expectations. 

At 0.6540, NZD/USD is consolidating the post-Federal Reserve rally around the highs of Wednesday. The kiwi rallied from a low of 0.6425 to a high of 0.6556.

The US dollar and US Treasury yields were under pressure following the Federal Reserve interest rate decision, statement and the Fed chair's presser. The US 2-year Treasury yield has fallen by some 5% to a low of 2.612%. 

After hiking by 50bps today and formally starting quantitative tightening as the Fed seeks to get a grip on inflation, Jerome Powell gave the green light to a series of additional 50bp hikes but said 75bps was not something that was being considered. 

''Ruling out 75bp hikes will limit scope for a blowout in expectations (which were, and are still split between 50 and 75bps for the June meeting), in turn weighing on the USD broadly,'' analysts at ANZ Bank said arguing that the ''correction seems warranted given the potential for Fed expectations to keep recalibrating lower.''

For the Reserve Bank of New Zealand, yesterday's labour data will have been eyed. The RBNZ had which had pencilled in a 3.1% lift in private sector labour costs in the February MPS. As analysts at ANZ Bank explained, ''the data will confirm that the labour market will be a key driver of domestic inflation pressures over 2022. This will require ongoing interest rate hikes to bring labour demand back in line with labour supply and nip a potential wage-price spiral in the bud. That’s consistent with our expectation for a 50bp hike in May.''

NZD/USD technical analysis

NZD/USD has rallied into a resistance area and would be expected to revert. The imbalance of price to the prior highs could be mitigated in the coming days/ and or sessions all the way to a 61.8% Fibonacci retracement.