NZD/USD aims to recapture 0.6300 as PBOC continues dovish stance

• NZD/USD is approaching the 0.6300 resistance as the PBoC has maintained the status quo.
• Investors are expecting that an interest rate hike in July monetary policy meeting by the Fed would be the last nail in the coffin.
• BofA has cut China’s growth forecast to 5.1% after disappointing GDP numbers for the second quarter.

The NZD/USD pair is looking to recapture the round-level resistance of 0.6300 in the European session. The Kiwi asset has attracted bids after a corrective move and has resumed its upside journey. Strength in the Kiwi asset is backed by marginal weakness in the US Dollar Index (DXY). The USD Index is demonstrating signs of volatility contraction as investors are shifting their focus towards the interest rate decision by the Federal Reserve (Fed), which will be announced next week.

S&P500 futures have posted decent losses in London, portraying a cautious market mood. Investors are turning anxious amid uncertainty about further action in the FX domain due to a light economic calendar of the United States. In addition to that, the second-quarter result season has started and a stock-specific action is expected in equity markets.

The USD Index is struggling to stabilize above the psychological support of 100.00 as investors are expecting that interest rates by the Fed will peak around 5.25-5.50%. This conveys that an interest rate hike in July monetary policy meeting by the Fed would be the last nail in the coffin. Convictions in investors about interest rate peak after July’s policy have faded fears of a recession in the United States.

On the New Zealand Dollar front, the People’s Bank of China (PBoC) announced an unchanged interest rate policy. The PBoC has kept its dovish interest rate stance steady as the Chinese economy is going through tough times due to bleak demand by households. Bank of America (BofA) has cut China’s growth forecast to 5.1% after disappointing Gross Domestic Product (GDP) numbers for the second quarter. A downward revision of the economic growth forecast has turned the global market cautious.

It is worth noting that New Zealand is one of the leading trading partners of China and PBoC’s supportive monetary policy provides cushion to the New Zealand Dollar.