NZD/USD struggles around 0.6200 despite dovish PBOC, spotlight shifts to Jackson Hole

• NZD/USD has extended its recovery to near 0.6200 after printing a monthly low of 0.6166.
• PBOC’s dovish policy will improve kiwi exports and will trim its fiscal deficit.
• The Fed will continue its hawkish tone at Jackson Hole Economic Symposium.

The NZD/USD pair has overstepped the immediate hurdle of 0.6200 and is looking to add bonus pips ahead. The market participants have underpinned the kiwi bulls after the dovish monetary policy by the People Bank of China (PBOC).

In monetary policy meetings, the PBOC has elevated its one-year and five-year Prime Lending Rate (PLR) by 5 basis points (bps) and 15 bps respectively. A dovish stance was highly expected by the PBOC as the Chinese economy is facing the headwinds of shrinkage in economic activities, particularly in infrastructure, construction, and chemical manufacturing.

It is worth noting that New Zealand is a leading trading partner of China. Therefore, a loose monetary policy by the PBOC is strengthening the antipodean. A loose monetary policy by the PBOC will increase exports to China and will trim the kiwi’s fiscal deficit.

Last week, the kiwi bulls remained in the grip of bears despite the fourth consecutive 50 basis points (bps) Official Cash Rate (OCR) hike by the Reserve Bank of New Zealand (RBNZ). Now, the RBNZ’s OCR stands at 3% and the central bank is targeting 4%.

On the US dollar front, the US dollar index (DXY) has turned into a consolidating trajectory after printing a monthly high of 108.29. Investors are awaiting the commentary from Federal Reserve (Fed) chair Jerome Powell on monetary policy guidance. The odds are favoring a tad less hawkish tone as price pressures have displayed exhaustion signals and the unavailability of cheap money is impacting the US economic activities.