The NZD/USD pair has displayed a decent rebound after hitting a low of 0.6196 in the late New York session. A rebound in the positive market sentiment has underpinned the risk-perceived currencies, which has eventually supported the kiwi dollar. It would be justify claiming that the clouds of uncertainty over the rate hike announcement by the Federal Reserve (Fed) are fading away and the market participants have started pouring liquidity into the risk-sensitive assets.
As per the CME Fedwatch tool, the chances of announcing a rate hike of 75 basis points (bps) are 99%. Considering a weakness in the US dollar index (DXY), a significant jump in the odds of a rate hike is being discounted by the market participants.
The DXY is declining towards the psychological support of 105.00 after recording a fresh 19-year high at 105.65. The fundamentals in the US economy have not changed yet as price pressures are accelerating sharply. Therefore a corrective move in the DXY should not be considered a bearish reversal in the counter.
On the kiwi front, investors are awaiting the release of the Business NZ Purchase Managers Index (PMI), which is due on Friday. The Business NZ PMI IS seen at 52.7, higher than the prior print of 51.2. A better-than-expected reading will be beneficial for the antipodean while subdued or vulnerable figures will bring offers in the counter.
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