NZD/USD surrenders 0.6240 as market mood dampens, RBNZ hogs limelight

• NZD/USD has slipped firmly below 0.6240 as the risk-off market mood has strengthened.
• Anxiety among investors is soaring ahead of the opening of the US markets after an extended weekend.
• A promise of a cyclone relief package from NZ Hipkins could propel inflationary pressures further.

The NZD/USD pair has slipped below 0.6240 in the early European session. The Kiwi asset is expected to continue its downside movement as anxiety among investors is soaring ahead of the opening of the US markets after an extended weekend.

S&P500 futures are showing losses as the US markets are yet to show the impact of US-China tensions. Apart from that, missile launching by North Korea on weekend near Japan’s EEC region event will also be discounted by the market participants. The struggle of the US Dollar Index (DXY) for pushing its auction above 103.70 is intact, at the time of writing. Meanwhile, the 10-year US Treasury yields have trimmed some gains and have slipped to near 3.85%.

Investors’ entire focus will remain on the interest rate decision by the Reserve Bank of New Zealand (RBNZ), which is scheduled for Wednesday. February’s monetary policy of RBNZ is extremely important as New Zealand Prime Minister (PM) Chris Hipkins has promised a cyclone relief package of NZ$300 million ($187.08 million).

In times, when the New Zealand economy is struggling to tame galloping inflation, the fresh release of the helicopter money carries the potential of propelling inflationary pressures further. The situation is extremely troublesome for RBNZ Governor Adrian Orr as more rates could impact the economic activities ahead. As per the consensus, the RBNZ is expected to announce a hike in the Official Cash Rate (OCR) by 50 basis points (bps) to 4.75%.